State Codes and Statutes

Statutes > Texas > Insurance-code > Title-6-organization-of-insurers-and-related-entities > Chapter-841-life-health-or-accident-insurance-companies

INSURANCE CODE

TITLE 6. ORGANIZATION OF INSURERS AND RELATED ENTITIES

SUBTITLE C. LIFE, HEALTH, AND ACCIDENT INSURERS AND RELATED

ENTITIES

CHAPTER 841. LIFE, HEALTH, OR ACCIDENT INSURANCE COMPANIES

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 841.001. DEFINITIONS.

(1) "Accident insurance company" means a corporation authorized

under a charter to engage in business involving the payment of

money or another thing of value in the event of an injury to or

the disablement or death of an individual as a result of travel

or a general accident by land or water.

(2) "Alien company" means a life, accident, or health insurance

company organized under the laws of a foreign country.

(3) "Beneficiary" is the person to whom an insurance policy is

payable.

(4) "Domestic insurance company," in this chapter and another

law described by Section 841.002, means an insurance company

organized under the laws of this state as:

(A) a life insurance company;

(B) an accident insurance company;

(C) a life and accident insurance company;

(D) a health and accident insurance company; or

(E) a life, health, and accident insurance company.

(5) "Foreign company" means a life, accident, or health

insurance company organized under the laws of another state.

(6) "Health insurance company" means a corporation authorized

under a charter to engage in business involving the payment of

money or another thing of value in the event of loss resulting

from disability incurred as a result of sickness or ill health.

(7) "Home office," with respect to an insurance company, means

the principal office of the company in the state or country under

whose laws the company is organized.

(8) "Insurance company" and "company" include all corporations

engaged as a principal in the business of life, accident, or

health insurance.

(9) "Life insurance company" means a corporation authorized

under a charter to engage in business involving the payment of

money or another thing of value conditioned on the continuance or

cessation of human life or involving an insurance, guaranty, or

contract for the payment of an endowment or annuity.

(10) "Policyholder" and "insured" mean the individual on whose

life an insurance policy is effected.

(11) "Profits," with respect to an insurance company, means the

portion of the company's funds that are not:

(A) required for the payment of losses and expenses; or

(B) set aside for any other purpose required by law.

(12) "United States branch" means:

(A) the business unit through which business is transacted

within the United States by an alien company;

(B) the assets and liabilities of the company within the United

States pertaining to the business;

(C) the management powers pertaining to the business and to the

assets and liabilities; or

(D) any combination of the items described by Paragraphs

(A)-(C).

(13) The definitions of "company" and "insurance company" apply

to this chapter and another law described by Section 841.002

unless a different meaning is plainly required by the context in

which the term appears.

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

2003.

Sec. 841.002. APPLICABILITY OF CHAPTER AND OTHER LAW. Except as

otherwise expressly provided by this code, each insurance company

incorporated or engaging in business in this state as a life

insurance company, an accident insurance company, a life and

accident insurance company, a health and accident insurance

company, or a life, health, and accident insurance company is

subject to:

(1) this chapter;

(2) Chapter 3;

(3) Chapters 425 and 492;

(4) Title 7;

(5) Sections 1202.051, 1204.151, 1204.153, and 1204.154;

(6) Subchapter A, Chapter 1202, Subchapters A and F, Chapter

1204, Subchapter A, Chapter 1273, Subchapters A, B, and D,

Chapter 1355, and Subchapter A, Chapter 1366;

(7) Subchapter A, Chapter 1507;

(8) Chapters 1203, 1210, 1251-1254, 1301, 1351, 1354, 1359,

1364, 1368, 1505, 1506, 1651, 1652, and 1701; and

(9) Chapter 177, Local Government Code.

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.018, eff. April 1, 2009.

Sec. 841.003. APPLICABILITY OF LAW GOVERNING CORPORATIONS. An

insurance company operating under this chapter is subject to the

Texas Business Corporation Act, the Texas Miscellaneous

Corporation Laws Act (Article 1302-1.01 et seq., Vernon's Texas

Civil Statutes), and any other law of this state that governs

corporations in general to the extent those laws are not

inconsistent with this chapter or another law described by

Section 841.002.

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

2003.

Sec. 841.004. NET ASSETS DEFINED; RULES. (a) A company's "net

assets" consist of the company's funds that are available for the

payment of a company's obligations in this state, including:

(1) uncollected premiums that are not more than three months

past due and deferred premiums on policies actually in force,

after the deduction of:

(A) all unpaid losses and claims;

(B) all claims for losses; and

(C) all other debts, exclusive of capital stock; and

(2) if the total value of the equipment exceeds $2,000, the

value of all electronic machines that comprise a data processing

system or systems and of all other office equipment, furniture,

machines, and labor-saving devices purchased for and used in

connection with the business of the insurance company to the

extent that the total actual cash market value of those assets is

less than 10 percent of the other admitted assets of the company.

(b) The commissioner may adopt rules defining electronic

machines and systems, office equipment, furniture, machines, and

labor-saving devices described by Subsection (a) and stating the

maximum period for which each class of equipment may be

amortized.

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

2003.

SUBCHAPTER B. FORMATION AND STRUCTURE OF DOMESTIC COMPANIES

Sec. 841.051. FORMATION OF COMPANY. (a) Three or more

residents of this state may form:

(1) a life insurance company;

(2) an accident insurance company;

(3) a life and accident insurance company;

(4) a health and accident insurance company; or

(5) a life, health, and accident insurance company.

(b) To form a domestic insurance company:

(1) each incorporator must sign and acknowledge the articles of

incorporation of the company; and

(2) the incorporators must file the articles of incorporation

with the department.

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

2003.

Sec. 841.052. ARTICLES OF INCORPORATION. (a) Articles of

incorporation of a proposed domestic insurance company must

state:

(1) the name of the company;

(2) the location of the company's home office;

(3) the kinds of insurance business in which the company

proposes to engage;

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

(5) the amount of the company's capital stock;

(6) the number of shares of the company's capital stock;

(7) the amount of the company's surplus; and

(8) the period of the company's duration, which may be

perpetual.

(b) The incorporators of a domestic insurance company may

include in the articles of incorporation other provisions that

are not inconsistent with law.

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

2003.

Sec. 841.053. COMPANY NAME. (a) The name of a domestic

insurance company must contain the words "Insurance Company."

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

the name of another domestic insurance company as to likely

mislead the public.

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

2003.

Sec. 841.054. CAPITAL STOCK AND SURPLUS REQUIREMENTS. (a) A

domestic insurance company must have capital stock in an amount

of at least $700,000 and surplus in an amount of at least

$700,000.

(b) All of the capital stock required by Subsection (a) must be

fully subscribed and paid up and delivered to the incorporators

before the articles of incorporation are filed.

(c) At the time of incorporation, the required capital and

surplus shall consist only of:

(1) United States currency;

(2) bonds of the United States, this state, or a county or

municipality of this state; or

(3) government insured mortgage loans that are authorized by

this chapter or Chapter 425, with not more than 50 percent of the

required capital invested in first mortgage real property loans.

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.019, eff. April 1, 2009.

Sec. 841.055. SHARES OF STOCK. (a) The shares of stock of an

insurance company operating under this chapter may be divided or

converted into shares of stock with a par value or shares of

stock without par value or into a combination of shares with or

without par value.

(b) Each issued share of stock must be fully paid for and

nonassessable.

(c) The insurance company by an amendment to its charter may

increase or decrease the total number of shares of stock the

company is authorized to issue if:

(1) shares representing at least 50 percent of the total par

value of the authorized shares with a par value, if any, have

been in good faith subscribed and fully paid for; and

(2) shares representing at least 50 percent of the total number

of the authorized shares without a par value, if any, have been

in good faith subscribed and fully paid for.

(d) Authorized but unissued shares of stock of an insurance

company are not considered capital, stock, or capital stock of

the company.

(e) This section and Sections 841.056 and 841.057 do not impair

the charter rights of an insurance company authorized to issue

shares of stock with or without a par value before September 6,

1955.

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

2003.

Sec. 841.056. REQUIREMENTS FOR SHARES OF STOCK WITH PAR VALUE.

(a) The shares of stock of an insurance company operating under

this chapter that are divided or converted into par value shares,

if any, must have a par value of not less than $1 or more than

$100.

(b) Each par value share of stock must be fully paid for before

issuance in an amount that is not less than the share's par

value.

(c) When an application for charter or an amendment to the

charter authorizing the issuance of shares of stock with a par

value is filed, the insurance company shall file with the

department a statement under oath stating:

(1) the total number of par value shares subscribed; and

(2) the actual total consideration the company received for

those shares.

(d) The shareholders of an insurance company authorizing par

value shares of stock must in good faith subscribe and fully pay

for shares representing at least 50 percent of the total par

value of the authorized shares with a par value before the

company:

(1) is granted a charter; or

(2) amends its charter to authorize the issuance of par value

shares.

(e) If all of the authorized par value shares of stock are not

subscribed and paid for when the charter is granted or the

amendment is filed, respectively, the insurance company shall

file with the department a certificate authenticated by a

majority of the directors stating the total number of par value

shares issued and the actual total consideration received for

those shares. The company shall file the certificate not later

than the 90th day after the date of issuance of those remaining

shares. The company is not required to file an amendment to its

charter or take further action to effect the increase in the

capital and surplus of the company.

(f) The actual consideration received by an insurance company

for a par value share constitutes capital to the extent of its

par value and the remainder, if any, constitutes surplus.

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

2003.

Sec. 841.057. REQUIREMENTS FOR SHARES OF STOCK WITHOUT PAR

VALUE. (a) The shares of stock of an insurance company

operating under this chapter that are divided or converted into

shares without par value, if any, must be equal in all respects.

(b) An insurance company may issue and dispose of authorized

shares without par value for money or for notes, mortgages, and

stocks in the form authorized by law for capital stock of

insurance companies. Each share of stock without par value must

be fully paid before issuance. After the company receives payment

for a share of stock issued under this section, the share is not

subject to additional call or assessment, and the subscriber or

holder of the share is not required to make an additional payment

with respect to the share.

(c) The shareholders of an insurance company authorizing shares

of stock without par value must in good faith subscribe and pay

for shares representing at least 50 percent of the authorized

shares without par value before the company is granted a charter

or has its charter amended to authorize the issuance of shares

without par value. The total amount paid for the shares must be

at least $250,000.

(d) When an application for charter or an amendment to the

charter authorizing the issuance of shares without par value is

filed, the insurance company shall file with the department a

statement under oath stating:

(1) the number of shares without par value subscribed; and

(2) the actual consideration the company received for those

shares.

(e) If all of the authorized shares of stock without par value

are not subscribed and paid for when the charter is granted or

the amendment is filed, respectively, the insurance company shall

file with the department a certificate authenticated by a

majority of the directors stating the number of shares without

par value issued and the consideration received for those shares.

(f) The insurance company shall file the certificate required by

Subsection (e) not later than the 90th day after the date of

issuance of those remaining shares. The portion of the

consideration received for shares without par value that is

designated as capital by the company's directors, or by the

company's shareholders if the charter or articles of

incorporation reserve the right to make that determination to the

shareholders, constitutes capital and the remainder, if any,

constitutes surplus. The company is not required to file an

amendment to its charter or take further action to effect the

increase in the capital and surplus of the company.

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

2003.

Sec. 841.058. APPLICATION FOR CHARTER. (a) To obtain a charter

for a domestic insurance company, the incorporators must pay to

the department the charter fee in an amount determined under

Chapter 202 and file with the department:

(1) an application for charter on the form and containing the

information prescribed by the commissioner;

(2) the company's articles of incorporation; and

(3) an affidavit made by two or more of the incorporators that

states that:

(A) the minimum capital and surplus requirements of Section

841.054 are satisfied;

(B) the capital and surplus are the bona fide property of the

company; and

(C) the information in the articles of incorporation is true and

correct.

(b) The commissioner may require that the incorporators provide

at their expense additional evidence of a matter required in the

affidavit before the commissioner takes further action on the

application for charter.

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.020, eff. April 1, 2009.

Sec. 841.059. ACTION BY COMMISSIONER AND DEPARTMENT AFTER

FILING. (a) After the charter fee is paid and all items

required for a charter under Section 841.058 are filed with the

department, the department shall make or cause to be made a full

and thorough examination of the domestic insurance company.

(b) The domestic insurance company shall pay for the examination

under Subsection (a)(2).

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

2003.

Amended by:

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

1022, Sec. 8, eff. June 19, 2009.

Sec. 841.061. ACTION ON APPLICATION. (a) In considering the

application, the commissioner shall determine if:

(1) the minimum capital and surplus required by Section 841.054

are the bona fide property of the domestic insurance company;

(2) the proposed officers, directors, and managing executive of

the company have sufficient insurance experience, ability, and

standing to make success of the proposed company probable; and

(3) the applicants are acting in good faith.

(b) If the commissioner determines that the applicant has not

met the standards set out by Subsection (a), the commissioner

shall deny the application in writing, giving the reason for the

denial. An application may not be granted unless it is

adequately supported by competent evidence.

(b-1) On the applicant's request, the commissioner shall hold a

hearing on a denial. Not later than the 30th day after the date

of the applicant's request for a hearing, the commissioner shall

request a hearing date.

(b-2) An interested party may participate fully and in all

respects in any proceeding related to the application. An

intervenor has the rights and privileges of a proper or necessary

party in a civil suit in the courts of this state, including the

right to be represented by counsel.

(c) If the commissioner does not deny the application under

Subsection (b), the commissioner shall approve the application.

On approval of an application, the department shall record the

information required by Section 841.058 in records maintained for

that purpose. On receipt of a fee in the amount determined under

Chapter 202, the commissioner shall provide to the incorporators

a certified copy of the application, articles of incorporation,

and submitted affidavit.

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.021, eff. April 1, 2009.

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

1022, Sec. 9, eff. June 19, 2009.

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

1022, Sec. 10, eff. June 19, 2009.

Sec. 841.062. BEGINNING OF CORPORATE EXISTENCE. On receipt of

the certified copy of documents under Section 841.061(c), the

domestic insurance company becomes a body politic and corporate,

and the incorporators may complete organization of the company

under Section 841.063.

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

2003.

Sec. 841.063. ORGANIZATION MEETING. (a) After receipt of the

certified copy of documents under Section 841.061(c), the

incorporators shall promptly call a meeting of the domestic

insurance company's shareholders. The shareholders shall:

(1) adopt bylaws to govern the company; and

(2) elect the company's initial board of directors.

(b) The directors elected under this section serve until

directors are first elected under Section 841.153.

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

2003.

SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS

Sec. 841.101. CERTIFICATE OF AUTHORITY REQUIRED. A domestic

insurance company may not engage in the business of insurance in

this state, except for the lending of money, without first

obtaining from the commissioner a certificate of authority that:

(1) shows that the company has fully complied with the laws of

this state; and

(2) authorizes the company to engage in the business of

insurance in this state.

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

2003.

Sec. 841.102. SCHEDULE OF ASSETS. Two or more officers of the

domestic insurance company shall execute and file with the

department:

(1) a sworn schedule of each of the assets of the company

exhibited to the department during the examination under Section

841.059 showing the value of the assets; and

(2) a sworn statement that the assets are the bona fide,

unconditional, and unencumbered property of the company and are

worth the amount stated in the schedule.

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

2003.

Sec. 841.103. ISSUANCE OF CERTIFICATE OF AUTHORITY. (a) If the

commissioner makes a determination favorable to the applicants on

all issues under Section 841.061(a), the commissioner, on

compliance with the requirements of Section 841.102, shall issue

to the domestic insurance company a certificate of authority

authorizing the company to engage in the kinds of business

authorized by the company's charter.

(b) On written request of a domestic insurance company, the

commissioner shall provide a certified copy of the company's

certificate of authority to the company for each of the company's

agents in this state.

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

2003.

Sec. 841.104. TAX PAYMENT REQUIRED FOR ISSUANCE OF CERTAIN

CERTIFICATES OF AUTHORITY. (a) This section applies to a life

insurance company that:

(1) has previously held a certificate of authority to engage in

the business of life insurance in this state;

(2) ceased to write new business in this state under that

certificate of authority; and

(3) after ceasing to write new business, continued to collect

from residents of this state renewal or other premiums on

policies written under that certificate of authority.

(b) A life insurance company to which this section applies may

not obtain a new certificate of authority to engage in the

business of life insurance in this state until the company:

(1) files with the department under oath a report that discloses

the gross amount of renewal or other premiums received each

calendar year from residents of this state after the period

covered by the company's last tax report of gross premium

receipts filed under this code; and

(2) pays to the state occupation taxes on those premiums.

(c) The life insurance company shall pay the occupation tax for

each year of nonpayment. The company shall pay the tax for each

year at the same rate for that year as a company engaged in the

business of life insurance in this state during that year.

(d) The life insurance company shall remit the penalties for

failure to pay the taxes and file required reports when the

company pays the taxes and receives a certificate of authority.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 17, eff. April 1,

2005.

SUBCHAPTER D. MANAGEMENT OF COMPANY

Sec. 841.151. CONDUCTING SHAREHOLDERS' MEETING. (a) At a

meeting of a domestic insurance company's shareholders, each

shareholder is entitled to one vote for each fully paid up share

of stock appearing in the shareholder's name on the company's

books, except to the extent that the articles of incorporation

increase, limit, or deny voting rights to the holders of the

shares of a class of stock as authorized by the Texas Business

Corporation Act.

(b) A shareholder may vote in person or by written proxy.

(c) At a shareholders' meeting, a quorum is any number of

shareholders whose cumulative stock ownership in the domestic

insurance company represents a majority of the company's paid up

capital stock.

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

2003.

Sec. 841.152. BOARD OF DIRECTORS. (a) Subject to the bylaws of

the domestic insurance company, as adopted or amended by the

shareholders or directors, the board of directors has full

management and control of the company.

(b) The board consists of not fewer than five directors. A

director is not required to be a shareholder unless such a

qualification is required by the articles of incorporation or

bylaws of the company.

(c) The directors shall keep a full and correct record of the

board's transactions. The shareholders may inspect those records

during business hours.

(d) The directors shall fill a vacancy that occurs on the board

or in any office of the company.

(e) A majority of the board is a quorum.

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

2003.

Sec. 841.153. ELECTION OF DIRECTORS. (a) After a domestic

insurance company completes the organization of the company under

Section 841.063, the company shall hold an annual meeting of the

company's shareholders on the fourth Tuesday in April at the home

office of the company to elect the company's board of directors.

(b) After the directors are first elected under this section,

the annual meeting must be before May 1 of each year as

established by the company's bylaws. The directors serve one-year

terms beginning immediately after the election, except as

provided by Section 841.154.

(c) If the shareholders do not elect directors at an annual

meeting, the shareholders may elect the directors at a special

shareholders' meeting called for that purpose.

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

2003.

Sec. 841.154. STAGGERED TERMS FOR LARGE BOARD OF DIRECTORS. (a)

This section applies only to a domestic insurance company whose

board of directors consists of at least nine members.

(b) The bylaws of a domestic insurance company may provide that

the company's directors, other than initial directors, may be

elected to serve staggered terms as provided by this section.

(c) The company's directors shall be divided into two or three

classes, with each class consisting of an equal number of

directors to the extent possible. After the directors are divided

into classes:

(1) the terms of the directors in the first class expire on the

first annual meeting date after their initial election;

(2) the terms of the directors in the second class expire on the

second annual meeting date after their initial election; and

(3) the terms of the directors in the third class, if any,

expire on the third annual meeting date after their initial

election.

(d) At each annual meeting after the directors are first

elected, the shareholders shall elect the number of directors

whose terms expire on that date. Directors are elected for:

(1) staggered two-year terms, if the board is divided into two

classes; or

(2) staggered three-year terms, if the board is divided into

three classes.

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

2003.

Sec. 841.155. OFFICERS. (a) A domestic insurance company's

directors shall choose one of the directors to serve as the

company's president.

(b) Other officers of the domestic insurance company shall be

chosen in accordance with the company's bylaws. An officer is not

required to be a shareholder unless such a qualification is

required by the company's articles of incorporation or bylaws. An

officer other than the president is not required to be a director

unless such a qualification is required by the company's bylaws.

(c) The duties and compensation of a domestic insurance

company's officers are as stated in the company's bylaws. If the

bylaws do not state the duties or compensation of the officers,

the directors shall establish the duties or compensation.

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

2003.

Sec. 841.156. AMENDMENT OF CHARTER OR ARTICLES. (a) The

shareholders of a domestic insurance company by resolution may

amend the company's charter or articles of incorporation at any

shareholders' meeting.

(b) The amendment and a copy of the resolution certified by the

president and secretary of the domestic insurance company shall

be filed and recorded in the same manner as the charter.

(c) An amendment of the charter or articles takes effect when it

is recorded.

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

2003.

SUBCHAPTER E. CAPITAL AND SURPLUS

Sec. 841.201. FORM OF REQUIRED CAPITAL AND SURPLUS.

Notwithstanding any other provision of this code, after a charter

is granted under this chapter, the domestic insurance company:

(1) shall maintain the company's minimum capital at all times in

a form described by Section 841.054(c); and

(2) may invest the company's surplus as provided by this code.

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

2003.

Sec. 841.202. AUTHORIZED SHARES. (a) At any shareholders'

meeting, shareholders of a domestic insurance company whose

cumulative stock ownership represents a majority of the capital

stock of the company by resolution may increase or decrease the

amount of the company's capital stock, subject to this section.

(b) Capital stock may never be decreased to an amount that is

less than the minimum amount of paid-up stock required by Section

841.054.

(c) Two officers of the domestic insurance company must sign and

acknowledge a statement of the increase or decrease. The

acknowledged statement and a certified copy of the resolution

shall be filed and recorded in the same manner as the charter.

(d) For an increase or decrease of capital stock, the domestic

insurance company may require the return of the original

certificates evidencing the stock in exchange for new

certificates. An issuance of new certificates that results in a

transfer of stock is subject to Section 841.254.

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

2003.

Sec. 841.203. COMPANY'S REPURCHASE OF STOCK. (a) A legal

reserve life insurance company may purchase in the name of the

company outstanding shares of the company's capital stock as

provided by the Texas Business Corporation Act.

(b) A purchase of stock under this section is not considered an

investment and does not violate the provisions of this code

relating to eligible investments for a legal reserve life

insurance company.

(c) A legal reserve life insurance company that purchases stock

under this section shall file with the department not later than

the 10th day after the date of the purchase a statement that

contains:

(1) the name of each shareholder from whom the shares were

purchased; and

(2) the sum of money paid for those shares.

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

2003.

Sec. 841.204. EXEMPTION FROM REQUIRED INCREASE OF CAPITAL AND

SURPLUS. (a) Except as otherwise provided by this chapter, a

domestic insurance company that after September 1, 1991, had less

than the minimum amount of capital and surplus required for a

newly incorporated company under Section 841.054 may continue to

transact the kinds of business for which it holds a certificate

of authority.

(b) The insurance company shall immediately increase the amount

of its capital to the required amount of capital under Section

841.054 if there is:

(1) a change in the control of at least 50 percent of the voting

securities of the insurance company;

(2) a change in the control of at least 50 percent of the voting

securities of a holding company controlling the insurance

company; or

(3) a change in control of at least 50 percent by any other

method of control if the insurance company or holding company is

not controlled by voting securities.

(c) For purposes of Subsection (b), a transfer of ownership that

occurs because of death, regardless of whether the decedent died

testate or intestate, may not be considered a change in the

control of an insurance company or holding company if ownership

is transferred solely to one or more individuals, each of whom

would be an heir of the decedent if the decedent had died

intestate.

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

2003.

Sec. 841.205. COMMISSIONER MAY REQUIRE LARGER CAPITAL AND

SURPLUS AMOUNTS. (a) The commissioner by rule or guideline may

require a domestic insurance company that writes or assumes a

life insurance or annuity contract or assumes liability on or

indemnifies one person for any risk under an accident and health

insurance policy, or a combination of these policies, in an

amount that exceeds $10,000, to maintain capital and surplus in

amounts that exceed the minimum amounts required by this chapter

because of:

(1) the nature and kind of risks the company underwrites or

reinsures;

(2) the premium volume of risks the company underwrites or

reinsures;

(3) the composition, quality, duration, or liquidity of the

company's investment portfolio;

(4) fluctuations in the market value of securities the company

holds; or

(5) the adequacy of the company's reserves.

(b) A rule adopted under Subsection (a) must be designed to

ensure the financial solvency of an insurance company for the

protection of policyholders but may not require that the total

admitted assets of a company exceed 106 percent of its total

liabilities.

(c) A fraternal benefit society operating under Chapter 885 and

a mutual life insurance company operating under Chapter 882 are

subject to a rule adopted under this section.

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

2003.

Sec. 841.206. IMPAIRMENT OF CAPITAL AND SURPLUS. (a) An

insurance company incorporated or authorized to do the lines of

business authorized in this chapter may not have:

(1) the company's required capital impaired;

(2) more than 90 percent of the company's required minimum

surplus impaired; or

(3) the surplus required under Section 841.205 impaired.

(b) If the commissioner determines that an insurance company's

capital or surplus is impaired in violation of this section, the

commissioner shall:

(1) order the company to immediately reduce the level of

impairment to an acceptable level of impairment as specified by

the commissioner or prohibit the company from engaging in the

business of insurance in this state; and

(2) begin proceedings as necessary to determine any further

actions with respect to the impairment.

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

2003.

Amended by:

Acts 2005, 79th Leg., Ch.

728, Sec. 11.021, eff. September 1, 2005.

Sec. 841.207. ACTIONS OF COMMISSIONER WHEN CAPITAL AND SURPLUS

REQUIREMENTS NOT SATISFIED. If an insurance company does not

comply with the capital and surplus requirements of this chapter,

the commissioner may order the insurance company to cease writing

new business and may:

(1) place the insurance company under state supervision or

conservatorship;

(2) declare the insurance company to be in a hazardous condition

as provided by Subchapter A, Chapter 404;

(3) declare the insurance company to be impaired as provided by

Section 841.206; or

(4) apply to the insurance company any other applicable sanction

provided by this code.

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.022, eff. April 1, 2009.

SUBCHAPTER F. GENERAL POWERS, DUTIES, AND LIMITATIONS

Sec. 841.251. EVIDENCE OF EXPENDITURES. (a) A domestic

insurance company may not make an expenditure of $100 or more

unless the expenditure is evidenced by a voucher that:

(1) is signed by or on behalf of the individual, firm, or

corporation that receives the money; and

(2) describes the consideration received for the payment

correctly.

(b) For an expenditure for both services and disbursements, the

voucher must state the services rendered and disbursement made.

(c) For an expenditure related to a matter pending before a

legislature or public body or a department or officer of a state

or government, the voucher must describe both the nature of the

matter and the interest of the company in the matter correctly.

(d) If the domestic insurance company cannot obtain a voucher as

required by this section, the expenditure must be evidenced by:

(1) a paid check; or

(2) an affidavit that:

(A) describes the nature and purpose of the expenditure; and

(B) states the reason the voucher was not obtained.

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

2003.

Sec. 841.252. PAYMENTS TO OFFICERS, DIRECTORS, AND EMPLOYEES.

(a) Unless first authorized by a vote of a domestic insurance

company's board of directors or a committee of the board that has

the duty to authorize the payments, the company may not pay any

compensation or emolument in an amount that, when added to any

compensation or emolument paid to the person by an affiliated

domestic insurance company, exceeds $150,000 in any year to an

individual, firm, or corporation, including an officer or

director of the company.

(b) Subsection (a) does not prevent a domestic insurance company

from contracting with its agents for the payment of renewal

commissions.

(c) The shareholders of a domestic insurance company may

authorize the creation of one or more plans for the payment of

pensions, retirement benefits, or group insurance for the

company's officers and employees. The shareholders may delegate

to the company's board of directors the power and duty to

prepare, effect, finally approve, administer, and amend a plan.

(d) A mutual insurance company, acting through the company's

policyholders, may exercise the same discretion, and has the same

powers, privileges, and rights, as are conferred on a domestic

insurance company under Subsection (c).

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

2003.

Amended by:

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

94, Sec. 1, eff. September 1, 2009.

Sec. 841.253. LIFE INSURANCE COMPANY'S PAYMENT OF DIVIDENDS.

(a) A life insurance company may declare or pay a dividend to

its:

(1) policyholders only from the expense loading and profits made

by the company; and

(2) shareholders only from the company's earned surplus, as

defined by the commissioner.

(b) A life insurance company that is not showing a profit may

pay a dividend on its participating policies from the expense

loading on those policies.

(c) A life insurance company may not discriminate between

policyholders in paying a dividend from the expense loading under

this section.

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

2003.

Sec. 841.254. TRANSFER OF STOCK. (a) A domestic insurance

company's shares of stock are transferrable on the company's

books, in accordance with law and the bylaws of the company, by

the owner or the owner's authorized agent.

(b) Each person who becomes a shareholder by a transfer of

shares succeeds to all rights of the former holder of those

shares, by reason of that ownership.

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

2003.

Sec. 841.255. ANNUAL STATEMENT; FILING FEE. (a) Not later than

March 1 of each year, a domestic insurance company shall:

(1) prepare a statement showing the condition of the company on

December 31 of the preceding year; and

(2) deliver the statement to the department accompanied by a

filing fee in the amount determined under Chapter 202.

(b) The statement must be under oath of two of the domestic

insurance company's officers and show in detail:

(1) the character of the company's assets and liabilities on

December 31 of the preceding year;

(2) the amount and character of business transacted and money

received during the preceding year;

(3) how money was spent during the preceding year;

(4) the number and amount of the company's policies in force in

this state on that date; and

(5) the total amount of the company's policies in force on that

date.

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.023, eff. April 1, 2009.

Sec. 841.256. BUSINESS IN SEPARATE DEPARTMENTS OF DOMESTIC

INSURANCE COMPANY. A domestic insurance company may not transact

more than one of the kinds of insurance business described by

Section 841.051(a) unless the company establishes separate

departments to transact each kind of business.

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

2003.

Sec. 841.257. KINDS OF BUSINESS LIMITED. An insurance company

authorized to engage in the business of insurance under this

chapter or in accordance with Section 982.051 may not accept a

risk or write an insurance policy in this state or any other

state or country other than:

(1) a life, accident, or health insurance policy;

(2) reinsurance under Sections 492.051(b) and (c) or Chapter 493

by a life insurance company authorized to engage in the business

of insurance in this state; or

(3) reinsurance under Chapter 494 by a domestic insurance

company.

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

2003.

Amended by:

Acts 2005, 79th Leg., Ch.

728, Sec. 11.022, eff. September 1, 2005.

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

730, Sec. 2E.024, eff. April 1, 2009.

Sec. 841.258. AGENTS FOR COMPANY THAT CEASES WRITING NEW

BUSINESS. An insurance company that ceases to write new business

in this state may maintain in this state agents to collect

renewal premiums on outstanding policies the company has written

under its certificate of authority.

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

2003.

Amended by:

Acts 2005, 79th Leg., Ch.

728, Sec. 11.022, eff. September 1, 2005.

Sec. 841.259. ACTIVITIES OF DIRECTORS AND OFFICERS. (a) A

director or officer of an insurance company may not:

(1) receive money or another valuable thing for negotiating,

procuring, recommending, or aiding in a purchase or sale of

property by or a loan from the company; or

(2) have a pecuniary interest, as a principal, coprincipal,

agent, or beneficiary, in a purchase, sale, or loan described by

Subdivision (1).

(b) This section does not prohibit:

(1) a life insurance company from making a loan to a

policyholder in an amount that is not greater than the reserve

value of the policy; or

(2) a transaction, purchase, sale, or loan approved by the

commissioner under Subchapter A of Chapter 805 or Chapter 823.

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

2003.

Sec. 841.260. PROHIBITED COMMISSIONS. (a) In this section,

"contingent compensation" means a commission or other

compensation an insurance company pays to a person that is

contingent on:

(1) the writing or procurement of an insurance policy in the

company;

(2) the procurement of an application for an insurance policy in

the company;

(3) the payment of a renewal premium; or

(4) the assumption of an insurance risk by the company.

(b) A life insurance company that engages in the business of

insurance in this state may not, directly or indirectly, pay or

contract to pay a contingent compensation to:

(1) the president, vice president, secretary, or treasurer of

the company;

(2) any other officer of the company, other than an agent or

solicitor;

(3) an actuary of the company; or

(4) a medical director or other physician of the company whose

duty is to examine risks or applications for insurance for the

company.

(c) This section does not prohibit a plan of compensation to a

marketing officer according to the total amount of insurance the

insurance company writes or to the total amount of insurance in

force with the insurance company during a specified period if:

(1) the commissioner approves the plan under Subchapter A,

Chapter 805;

(2) the marketing officer is not responsible for underwriting,

rating, or otherwise approving the acceptability of insurance

risks; and

(3) the plan does not compensate the marketing officer according

to commissions on individual sales of any insurance product.

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

2003.

Sec. 841.261. CAUSES OF ACTION. (a) A domestic insurance

company may bring an action against any person, including a

policyholder or shareholder of the company, for any cause related

to the company's business.

(b) A policyholder or an heir or legal representative of a

policyholder may bring an action against a domestic insurance

company for a loss that accrues on a policy.

(c) An action enjoining, restraining, or interfering with the

prosecution of a domestic insurance company's business may be

brought only by the department.

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

2003.

SUBCHAPTER G. ISSUANCE OF POLICIES

Sec. 841.301. LIMITS ON AMOUNT OF ACCIDENT AND HEALTH INSURANCE

POLICIES. (a) A domestic insurance company may not assume

liability on or indemnify one person for any risk under one or

more accident, health, or hospitalization insurance policies, or

a combination of those policies, in an amount that exceeds

$10,000, unless the amount of the issued, outstanding, and stated

capital of the company is at least equal to the minimum amount of

capital required for a newly incorporated company under Section

841.054.

(b) A domestic insurance company that before January 1, 2002,

ceases to write or assume liability on, or indemnify any risk

under, a policy described by Subsection (a) in the amount

specified by Subsection (a) and notifies the commissioner of that

action is exempt from the requirements of Subsection (a) until

the date the company resumes writing those policies. A company

that resumes assuming liability on or indemnifying risks under

those policies shall comply with Subsections (a) and (c).

(c) A domestic insurance company that is exempt under Subsection

(b) shall maintain its issued, outstanding, and stated capital in

an amount that is at least $100,000 and is at least:

(1) the amount of capital held by the company on December 31,

1991, plus 10 percent of the difference between that amount and

an amount equal to the minimum amount of capital required for a

newly incorporated company under Section 841.054, if the last

date that the company writes a policy described by Subsection (a)

is during 1993;

(2) the amount of capital held by the company on December 31,

1991, plus 20 percent of the difference between that amount and

an amount equal to the minimum amount of capital required for a

newly incorporated company under Section 841.054, if the last

date that the company writes a policy described by Subsection (a)

is during 1994;

(3) the amount of capital held by the company on December 31,

1991, plus 30 percent of the difference between that amount and

an amount equal to the minimum amount of capital required for a

newly incorporated company under Section 841.054, if the last

date that the company writes a policy described by Subsection (a)

is during 1995;

(4) the amount of capital held by the company on December 31,

1991, plus 40 percent of the difference between that amount and

an amount equal to the minimum amount of capital required for a

newly incorporated company under Section 841.054, if the last

date that the company writes a policy described by Subsection (a)

is during 1996;

(5) the amount of capital held by the company on December 31,

1991, plus 50 percent of the difference between that amount and

an amount equal to the minimum amount of capital required for a

newly incorporated company under Section 841.054, if the last

date that the company writes a policy described by Subsection (a)

is during 1997;

(6) the amount of capital held by the company on December 31,

1991, plus 60 percent of the difference between that amount and

an amount equal to the minimum amount of capital required for a

newly incorporated company under Section 841.054, if the last

date that the company writes a policy described by Subsection (a)

is during 1998;

(7) the amount of capital held by the company on December 31,

1991, plus 70 percent of the difference between that amount and

an amount equal to the minimum amount of capital required for a

newly incorporated company under Section 841.054, if the last

date that the company writes a policy described by Subsection (a)

is during 1999;

(8) the amount of capital held by the company on December 31,

1991, plus 80 percent of the difference between that amount and

an amount equal to the minimum amount of capital required for a

newly incorporated company under Section 841.054, if the last

date that the company writes a policy described by Subsection (a)

is during 2000; and

(9) the amount of capital held by the company on December 31,

1991, plus 90 percent of the difference between that amount and

an amount equal to the minimum amount of capital required for a

newly incorporated company under Section 841.054, if the last

date that the company writes a policy described by Subsection (a)

is during 2001.

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

2003.

Sec. 841.302. LIMITS ON LIFE OR ACCIDENTAL DEATH INSURANCE. (a)

Until the amount of the capital and surplus of a domestic

insurance company is at least $100,000, the company may not

insure any one life for more than $20,000 in the event of death

from natural causes or more than $40,000 in the event of death

from accidental causes.

(b) If the net capital and surplus of a domestic insurance

company is at least $75,001 but less than $100,000, the company,

for any policy issued by the company, shall reinsure the amount

of the benefit that exceeds $4,000 in the event of death from

natural causes and the amount of the benefit that exceeds $8,000

in the event of death from accidental causes.

(c) If the net capital and surplus of a domestic insurance

company is at least $50,001 but less than $75,001, the company,

for any policy issued by the company, shall reinsure the amount

of the benefit that exceeds $3,000 in the event of death from

natural causes and the amount of the benefit that exceeds $6,000

in the event of death from accidental causes.

(d) If the net capital and surplus of a domestic insurance

company is at least $35,001 but less than $50,001, the company,

for any policy issued by the company, shall reinsure the amount

of the benefit that exceeds $2,000 in the event of death from

natural causes and the amount of the benefit that exceeds $4,000

in the event of death from accidental causes.

(e) If the net capital and surplus of a domestic insurance

company is $35,000 or less, the company, for any policy issued by

the company, shall reinsure the amount of the benefit that

exceeds $1,000 in the event of death from natural causes and the

amount of the benefit that exceeds $2,000 in the event of death

from accidental causes.

(f) Benefits under this section must be reinsured with a legal

reserve company that is authorized to engage in the business of

insurance in this state.

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

2003.

Sec. 841.303. ENTIRE CONTRACT. Each policy of insurance issued

or delivered in this state by any life insurance company engaged

in business in this state constitutes the entire contract between

the parties, except that if the application is made a part of the

contract, the policy and the application constitute the entire

contract.

Redesignated from Insurance Code Sec. 1101.003(a) and amended by

Acts 2003, 78th Leg., ch. 1276, Sec. 10A.204(a), eff. Sept. 1,

2003.

SUBCHAPTER H. DEPOSIT OF SECURITIES

Sec. 841.351. DEPOSIT WITH COMPTROLLER. (a) A domestic

insurance company may, at its option, deposit with the

comptroller either:

(1) securities in which the company's capital stock is invested;

or

(2) securities in an amount equal to the amount of the company's

capital stock.

(b) Securities deposited under Subsection (a) must be securities

of a class authorized by the laws of this state for investments

of a domestic insurance company's capital stock.

(c) A domestic insurance company may, at its option, withdraw a

deposit made under Subsection (a), or any portion of the deposit,

after substituting a deposit of securities of a like class and of

an amount and value equal to the withdrawn deposit or portion of

deposit.

(d) The commissioner must first approve any securities deposited

or being substituted under this section.

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

2003.

Sec. 841.352. ISSUANCE OF RECEIPT FOR DEPOSIT. When a domestic

insurance company deposits securities under this subchapter, the

comptroller shall issue to the company a receipt that:

(1) describes the deposit in a manner that identifies the

securities; and

(2) states that the securities are held on deposit as capital

stock investments of the company.

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

2003.

Sec. 841.353. ADVERTISEMENT OF DEPOSIT. A domestic insurance

company that makes a deposit under this subchapter may:

(1) advertise the fact that a deposit has been made; or

(2) print a copy of the receipt for the deposit on any policy

the company issues.

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

2003.

Sec. 841.354. ACCESS TO DEPOSIT. In accordance with reasonable

rules adopted by the comptroller and the commissioner, the proper

officer or agent of a domestic insurance company making a deposit

of securities under this subchapter may at a reasonable time:

(1) examine the deposit;

(2) detach coupons from the securities; and

(3) collect interest on the deposit.

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

2003.

Sec. 841.355. WITHDRAWAL OF DEPOSIT AFTER MERGER, CONSOLIDATION,

OR TOTAL REINSURANCE. (a) When two or more domestic insurance

companies that have two or more deposits of securities under this

subchapter merge, consolidate, or enter into a total reinsurance

contract by which the ceding company is dissolved and its assets

and liabilities are acquired or assumed by the surviving company,

the new, surviving, or reinsuring insurance company, on approval

of the commissioner, may withdraw all of the deposits, except for

the deposit of the greatest amount and value. The new, surviving,

or reinsuring insurance company must demonstrate to the

commissioner that the company is the owner of the deposited

securities before the commissioner approves the withdrawal of

those securities.

(b) In accordance with an order of the commissioner approving a

withdrawal of securities under this section, the comptroller

shall release, transfer, and deliver the withdrawn securities to

their owner.

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

2003.

Sec. 841.356. SITUS OF DEPOSIT FOR TAX PURPOSES. For purposes

of state, county, or municipal taxation, the situs of deposited

securities is the municipality and county in which the depositing

company's home office is located.

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

2003.

Sec. 841.357. MAINTENANCE OF DEPOSIT. A domestic insurance

company must maintain a deposit of securities under this

subchapter as long as the company has outstanding any liability

to a policyholder in this state.

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

2003.

SUBCHAPTER O. ENFORCEMENT AND INTERVENTION

Sec. 841.701. REVOCATION OF CERTIFICATE OF AUTHORITY. (a) If

the commissioner determines that an insurance company that holds

a certificate of authority does not comply with this chapter or

another law described by Section 841.002, the commissioner shall

notify the company that the commissioner intends to revoke its

certificate of authority on the expiration of the 30-day period

after the date actual notice is delivered or mailed under this

section.

(b) Notice under this section must:

(1) be in writing; and

(2) be delivered to an executive officer of the company by

personal service or by registered mail.

(c) If an insurance company receiving notice under this section

does not fully comply before the expiration of the period

prescribed by Subsection (a), the commissioner shall revoke the

company's certificate of authority.

(d) An insurance company whose certificate of authority is

revoked under this section is not entitled to receive another

certificate of authority for a period of one year and until the

company has fully and in good faith complied with this chapter.

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

2003.

Sec. 841.702. APPEAL OF DETERMINATION TO REVOKE CERTIFICATE. An

insurance company aggrieved by an order of the commissioner to

revoke the company's certificate of authority under Section

841.701 may file suit in a court in Travis County to vacate the

order.

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

2003.

Amended by:

Acts 2005, 79th Leg., Ch.

728, Sec. 11.022, eff. September 1, 2005.

Sec. 841.703. CERTIFICATE OF AUTHORITY VOID ON FAILURE TO

SATISFY JUDGMENT. (a) If an officer holding an execution issued

on a final judgment rendered against an insurance company demands

payment of the judgment from an officer or attorney of record of

the company and the company does not fully satisfy the judgment

before the 31st day after the date the demand is made, the

officer shall certify the demand and failure to the commissioner,

regardless of whether the demand is made in this state.

(b) On receipt of a certification under Subsection (a), the

commissioner shall declare void the certificate of authority

issued to the company under this chapter.

(c) An insurance company whose certificate of authority is

declared void under this section may not engage in the business

of insurance in this state until:

(1) the judgment is fully satisfied and discharged; and

(2) the commissioner renews the company's certificate of

authority.

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

2003.

Sec. 841.704. FALSE STATEMENT, REPORT, OR OTHER DOCUMENT;

CRIMINAL PENALTY. (a) A person commits an offense if the person

executes or causes to be executed a statement, report, or other

document required by law to be filed with the commissioner that

contains a material statement or fact that the person knows to be

false.

(b) A person commits an offense if the person is an officer of

an insurance company that is not organized under the laws of this

state and the person files a statement, report, or other document

required by law to be filed with the commissioner that contains a

material statement or fact that the person knows to be false.

(c) An offense under this section is punishable by imprisonment

in the Texas Department of Criminal Justice for a term of not

less than one year.

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. 25.120, eff. September 1, 2009.

Sec. 841.705. PENALTY FOR FAILURE TO INVEST OR REPORT. (a) In

addition to the penalty provided by this subchapter, an insurance

company is subject to a penalty as prescribed by Subsection (b)

if, while holding a certificate of authority to engage in the

business of insurance in this state, or after the company ceases

to write new business or ceases to hold a certificate of

authority, the company intentionally fails or refuses to:

(1) make the investments required by Chapter 425;

(2) make a report required by a law described by Section

841.002;

(3) make any special report requested by the commissioner under

a law described by Section 841.002; or

(4) comply with another provision of a law described by Section

841.002.

(b) A penalty under this s

State Codes and Statutes

Statutes > Texas > Insurance-code > Title-6-organization-of-insurers-and-related-entities > Chapter-841-life-health-or-accident-insurance-companies

INSURANCE CODE

TITLE 6. ORGANIZATION OF INSURERS AND RELATED ENTITIES

SUBTITLE C. LIFE, HEALTH, AND ACCIDENT INSURERS AND RELATED

ENTITIES

CHAPTER 841. LIFE, HEALTH, OR ACCIDENT INSURANCE COMPANIES

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 841.001. DEFINITIONS.

(1) "Accident insurance company" means a corporation authorized

under a charter to engage in business involving the payment of

money or another thing of value in the event of an injury to or

the disablement or death of an individual as a result of travel

or a general accident by land or water.

(2) "Alien company" means a life, accident, or health insurance

company organized under the laws of a foreign country.

(3) "Beneficiary" is the person to whom an insurance policy is

payable.

(4) "Domestic insurance company," in this chapter and another

law described by Section 841.002, means an insurance company

organized under the laws of this state as:

(A) a life insurance company;

(B) an accident insurance company;

(C) a life and accident insurance company;

(D) a health and accident insurance company; or

(E) a life, health, and accident insurance company.

(5) "Foreign company" means a life, accident, or health

insurance company organized under the laws of another state.

(6) "Health insurance company" means a corporation authorized

under a charter to engage in business involving the payment of

money or another thing of value in the event of loss resulting

from disability incurred as a result of sickness or ill health.

(7) "Home office," with respect to an insurance company, means

the principal office of the company in the state or country under

whose laws the company is organized.

(8) "Insurance company" and "company" include all corporations

engaged as a principal in the business of life, accident, or

health insurance.

(9) "Life insurance company" means a corporation authorized

under a charter to engage in business involving the payment of

money or another thing of value conditioned on the continuance or

cessation of human life or involving an insurance, guaranty, or

contract for the payment of an endowment or annuity.

(10) "Policyholder" and "insured" mean the individual on whose

life an insurance policy is effected.

(11) "Profits," with respect to an insurance company, means the

portion of the company's funds that are not:

(A) required for the payment of losses and expenses; or

(B) set aside for any other purpose required by law.

(12) "United States branch" means:

(A) the business unit through which business is transacted

within the United States by an alien company;

(B) the assets and liabilities of the company within the United

States pertaining to the business;

(C) the management powers pertaining to the business and to the

assets and liabilities; or

(D) any combination of the items described by Paragraphs

(A)-(C).

(13) The definitions of "company" and "insurance company" apply

to this chapter and another law described by Section 841.002

unless a different meaning is plainly required by the context in

which the term appears.

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

2003.

Sec. 841.002. APPLICABILITY OF CHAPTER AND OTHER LAW. Except as

otherwise expressly provided by this code, each insurance company

incorporated or engaging in business in this state as a life

insurance company, an accident insurance company, a life and

accident insurance company, a health and accident insurance

company, or a life, health, and accident insurance company is

subject to:

(1) this chapter;

(2) Chapter 3;

(3) Chapters 425 and 492;

(4) Title 7;

(5) Sections 1202.051, 1204.151, 1204.153, and 1204.154;

(6) Subchapter A, Chapter 1202, Subchapters A and F, Chapter

1204, Subchapter A, Chapter 1273, Subchapters A, B, and D,

Chapter 1355, and Subchapter A, Chapter 1366;

(7) Subchapter A, Chapter 1507;

(8) Chapters 1203, 1210, 1251-1254, 1301, 1351, 1354, 1359,

1364, 1368, 1505, 1506, 1651, 1652, and 1701; and

(9) Chapter 177, Local Government Code.

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.018, eff. April 1, 2009.

Sec. 841.003. APPLICABILITY OF LAW GOVERNING CORPORATIONS. An

insurance company operating under this chapter is subject to the

Texas Business Corporation Act, the Texas Miscellaneous

Corporation Laws Act (Article 1302-1.01 et seq., Vernon's Texas

Civil Statutes), and any other law of this state that governs

corporations in general to the extent those laws are not

inconsistent with this chapter or another law described by

Section 841.002.

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

2003.

Sec. 841.004. NET ASSETS DEFINED; RULES. (a) A company's "net

assets" consist of the company's funds that are available for the

payment of a company's obligations in this state, including:

(1) uncollected premiums that are not more than three months

past due and deferred premiums on policies actually in force,

after the deduction of:

(A) all unpaid losses and claims;

(B) all claims for losses; and

(C) all other debts, exclusive of capital stock; and

(2) if the total value of the equipment exceeds $2,000, the

value of all electronic machines that comprise a data processing

system or systems and of all other office equipment, furniture,

machines, and labor-saving devices purchased for and used in

connection with the business of the insurance company to the

extent that the total actual cash market value of those assets is

less than 10 percent of the other admitted assets of the company.

(b) The commissioner may adopt rules defining electronic

machines and systems, office equipment, furniture, machines, and

labor-saving devices described by Subsection (a) and stating the

maximum period for which each class of equipment may be

amortized.

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

2003.

SUBCHAPTER B. FORMATION AND STRUCTURE OF DOMESTIC COMPANIES

Sec. 841.051. FORMATION OF COMPANY. (a) Three or more

residents of this state may form:

(1) a life insurance company;

(2) an accident insurance company;

(3) a life and accident insurance company;

(4) a health and accident insurance company; or

(5) a life, health, and accident insurance company.

(b) To form a domestic insurance company:

(1) each incorporator must sign and acknowledge the articles of

incorporation of the company; and

(2) the incorporators must file the articles of incorporation

with the department.

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

2003.

Sec. 841.052. ARTICLES OF INCORPORATION. (a) Articles of

incorporation of a proposed domestic insurance company must

state:

(1) the name of the company;

(2) the location of the company's home office;

(3) the kinds of insurance business in which the company

proposes to engage;

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

(5) the amount of the company's capital stock;

(6) the number of shares of the company's capital stock;

(7) the amount of the company's surplus; and

(8) the period of the company's duration, which may be

perpetual.

(b) The incorporators of a domestic insurance company may

include in the articles of incorporation other provisions that

are not inconsistent with law.

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

2003.

Sec. 841.053. COMPANY NAME. (a) The name of a domestic

insurance company must contain the words "Insurance Company."

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

the name of another domestic insurance company as to likely

mislead the public.

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

2003.

Sec. 841.054. CAPITAL STOCK AND SURPLUS REQUIREMENTS. (a) A

domestic insurance company must have capital stock in an amount

of at least $700,000 and surplus in an amount of at least

$700,000.

(b) All of the capital stock required by Subsection (a) must be

fully subscribed and paid up and delivered to the incorporators

before the articles of incorporation are filed.

(c) At the time of incorporation, the required capital and

surplus shall consist only of:

(1) United States currency;

(2) bonds of the United States, this state, or a county or

municipality of this state; or

(3) government insured mortgage loans that are authorized by

this chapter or Chapter 425, with not more than 50 percent of the

required capital invested in first mortgage real property loans.

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.019, eff. April 1, 2009.

Sec. 841.055. SHARES OF STOCK. (a) The shares of stock of an

insurance company operating under this chapter may be divided or

converted into shares of stock with a par value or shares of

stock without par value or into a combination of shares with or

without par value.

(b) Each issued share of stock must be fully paid for and

nonassessable.

(c) The insurance company by an amendment to its charter may

increase or decrease the total number of shares of stock the

company is authorized to issue if:

(1) shares representing at least 50 percent of the total par

value of the authorized shares with a par value, if any, have

been in good faith subscribed and fully paid for; and

(2) shares representing at least 50 percent of the total number

of the authorized shares without a par value, if any, have been

in good faith subscribed and fully paid for.

(d) Authorized but unissued shares of stock of an insurance

company are not considered capital, stock, or capital stock of

the company.

(e) This section and Sections 841.056 and 841.057 do not impair

the charter rights of an insurance company authorized to issue

shares of stock with or without a par value before September 6,

1955.

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

2003.

Sec. 841.056. REQUIREMENTS FOR SHARES OF STOCK WITH PAR VALUE.

(a) The shares of stock of an insurance company operating under

this chapter that are divided or converted into par value shares,

if any, must have a par value of not less than $1 or more than

$100.

(b) Each par value share of stock must be fully paid for before

issuance in an amount that is not less than the share's par

value.

(c) When an application for charter or an amendment to the

charter authorizing the issuance of shares of stock with a par

value is filed, the insurance company shall file with the

department a statement under oath stating:

(1) the total number of par value shares subscribed; and

(2) the actual total consideration the company received for

those shares.

(d) The shareholders of an insurance company authorizing par

value shares of stock must in good faith subscribe and fully pay

for shares representing at least 50 percent of the total par

value of the authorized shares with a par value before the

company:

(1) is granted a charter; or

(2) amends its charter to authorize the issuance of par value

shares.

(e) If all of the authorized par value shares of stock are not

subscribed and paid for when the charter is granted or the

amendment is filed, respectively, the insurance company shall

file with the department a certificate authenticated by a

majority of the directors stating the total number of par value

shares issued and the actual total consideration received for

those shares. The company shall file the certificate not later

than the 90th day after the date of issuance of those remaining

shares. The company is not required to file an amendment to its

charter or take further action to effect the increase in the

capital and surplus of the company.

(f) The actual consideration received by an insurance company

for a par value share constitutes capital to the extent of its

par value and the remainder, if any, constitutes surplus.

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

2003.

Sec. 841.057. REQUIREMENTS FOR SHARES OF STOCK WITHOUT PAR

VALUE. (a) The shares of stock of an insurance company

operating under this chapter that are divided or converted into

shares without par value, if any, must be equal in all respects.

(b) An insurance company may issue and dispose of authorized

shares without par value for money or for notes, mortgages, and

stocks in the form authorized by law for capital stock of

insurance companies. Each share of stock without par value must

be fully paid before issuance. After the company receives payment

for a share of stock issued under this section, the share is not

subject to additional call or assessment, and the subscriber or

holder of the share is not required to make an additional payment

with respect to the share.

(c) The shareholders of an insurance company authorizing shares

of stock without par value must in good faith subscribe and pay

for shares representing at least 50 percent of the authorized

shares without par value before the company is granted a charter

or has its charter amended to authorize the issuance of shares

without par value. The total amount paid for the shares must be

at least $250,000.

(d) When an application for charter or an amendment to the

charter authorizing the issuance of shares without par value is

filed, the insurance company shall file with the department a

statement under oath stating:

(1) the number of shares without par value subscribed; and

(2) the actual consideration the company received for those

shares.

(e) If all of the authorized shares of stock without par value

are not subscribed and paid for when the charter is granted or

the amendment is filed, respectively, the insurance company shall

file with the department a certificate authenticated by a

majority of the directors stating the number of shares without

par value issued and the consideration received for those shares.

(f) The insurance company shall file the certificate required by

Subsection (e) not later than the 90th day after the date of

issuance of those remaining shares. The portion of the

consideration received for shares without par value that is

designated as capital by the company's directors, or by the

company's shareholders if the charter or articles of

incorporation reserve the right to make that determination to the

shareholders, constitutes capital and the remainder, if any,

constitutes surplus. The company is not required to file an

amendment to its charter or take further action to effect the

increase in the capital and surplus of the company.

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

2003.

Sec. 841.058. APPLICATION FOR CHARTER. (a) To obtain a charter

for a domestic insurance company, the incorporators must pay to

the department the charter fee in an amount determined under

Chapter 202 and file with the department:

(1) an application for charter on the form and containing the

information prescribed by the commissioner;

(2) the company's articles of incorporation; and

(3) an affidavit made by two or more of the incorporators that

states that:

(A) the minimum capital and surplus requirements of Section

841.054 are satisfied;

(B) the capital and surplus are the bona fide property of the

company; and

(C) the information in the articles of incorporation is true and

correct.

(b) The commissioner may require that the incorporators provide

at their expense additional evidence of a matter required in the

affidavit before the commissioner takes further action on the

application for charter.

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.020, eff. April 1, 2009.

Sec. 841.059. ACTION BY COMMISSIONER AND DEPARTMENT AFTER

FILING. (a) After the charter fee is paid and all items

required for a charter under Section 841.058 are filed with the

department, the department shall make or cause to be made a full

and thorough examination of the domestic insurance company.

(b) The domestic insurance company shall pay for the examination

under Subsection (a)(2).

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

2003.

Amended by:

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

1022, Sec. 8, eff. June 19, 2009.

Sec. 841.061. ACTION ON APPLICATION. (a) In considering the

application, the commissioner shall determine if:

(1) the minimum capital and surplus required by Section 841.054

are the bona fide property of the domestic insurance company;

(2) the proposed officers, directors, and managing executive of

the company have sufficient insurance experience, ability, and

standing to make success of the proposed company probable; and

(3) the applicants are acting in good faith.

(b) If the commissioner determines that the applicant has not

met the standards set out by Subsection (a), the commissioner

shall deny the application in writing, giving the reason for the

denial. An application may not be granted unless it is

adequately supported by competent evidence.

(b-1) On the applicant's request, the commissioner shall hold a

hearing on a denial. Not later than the 30th day after the date

of the applicant's request for a hearing, the commissioner shall

request a hearing date.

(b-2) An interested party may participate fully and in all

respects in any proceeding related to the application. An

intervenor has the rights and privileges of a proper or necessary

party in a civil suit in the courts of this state, including the

right to be represented by counsel.

(c) If the commissioner does not deny the application under

Subsection (b), the commissioner shall approve the application.

On approval of an application, the department shall record the

information required by Section 841.058 in records maintained for

that purpose. On receipt of a fee in the amount determined under

Chapter 202, the commissioner shall provide to the incorporators

a certified copy of the application, articles of incorporation,

and submitted affidavit.

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.021, eff. April 1, 2009.

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

1022, Sec. 9, eff. June 19, 2009.

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

1022, Sec. 10, eff. June 19, 2009.

Sec. 841.062. BEGINNING OF CORPORATE EXISTENCE. On receipt of

the certified copy of documents under Section 841.061(c), the

domestic insurance company becomes a body politic and corporate,

and the incorporators may complete organization of the company

under Section 841.063.

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

2003.

Sec. 841.063. ORGANIZATION MEETING. (a) After receipt of the

certified copy of documents under Section 841.061(c), the

incorporators shall promptly call a meeting of the domestic

insurance company's shareholders. The shareholders shall:

(1) adopt bylaws to govern the company; and

(2) elect the company's initial board of directors.

(b) The directors elected under this section serve until

directors are first elected under Section 841.153.

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

2003.

SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS

Sec. 841.101. CERTIFICATE OF AUTHORITY REQUIRED. A domestic

insurance company may not engage in the business of insurance in

this state, except for the lending of money, without first

obtaining from the commissioner a certificate of authority that:

(1) shows that the company has fully complied with the laws of

this state; and

(2) authorizes the company to engage in the business of

insurance in this state.

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

2003.

Sec. 841.102. SCHEDULE OF ASSETS. Two or more officers of the

domestic insurance company shall execute and file with the

department:

(1) a sworn schedule of each of the assets of the company

exhibited to the department during the examination under Section

841.059 showing the value of the assets; and

(2) a sworn statement that the assets are the bona fide,

unconditional, and unencumbered property of the company and are

worth the amount stated in the schedule.

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

2003.

Sec. 841.103. ISSUANCE OF CERTIFICATE OF AUTHORITY. (a) If the

commissioner makes a determination favorable to the applicants on

all issues under Section 841.061(a), the commissioner, on

compliance with the requirements of Section 841.102, shall issue

to the domestic insurance company a certificate of authority

authorizing the company to engage in the kinds of business

authorized by the company's charter.

(b) On written request of a domestic insurance company, the

commissioner shall provide a certified copy of the company's

certificate of authority to the company for each of the company's

agents in this state.

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

2003.

Sec. 841.104. TAX PAYMENT REQUIRED FOR ISSUANCE OF CERTAIN

CERTIFICATES OF AUTHORITY. (a) This section applies to a life

insurance company that:

(1) has previously held a certificate of authority to engage in

the business of life insurance in this state;

(2) ceased to write new business in this state under that

certificate of authority; and

(3) after ceasing to write new business, continued to collect

from residents of this state renewal or other premiums on

policies written under that certificate of authority.

(b) A life insurance company to which this section applies may

not obtain a new certificate of authority to engage in the

business of life insurance in this state until the company:

(1) files with the department under oath a report that discloses

the gross amount of renewal or other premiums received each

calendar year from residents of this state after the period

covered by the company's last tax report of gross premium

receipts filed under this code; and

(2) pays to the state occupation taxes on those premiums.

(c) The life insurance company shall pay the occupation tax for

each year of nonpayment. The company shall pay the tax for each

year at the same rate for that year as a company engaged in the

business of life insurance in this state during that year.

(d) The life insurance company shall remit the penalties for

failure to pay the taxes and file required reports when the

company pays the taxes and receives a certificate of authority.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 17, eff. April 1,

2005.

SUBCHAPTER D. MANAGEMENT OF COMPANY

Sec. 841.151. CONDUCTING SHAREHOLDERS' MEETING. (a) At a

meeting of a domestic insurance company's shareholders, each

shareholder is entitled to one vote for each fully paid up share

of stock appearing in the shareholder's name on the company's

books, except to the extent that the articles of incorporation

increase, limit, or deny voting rights to the holders of the

shares of a class of stock as authorized by the Texas Business

Corporation Act.

(b) A shareholder may vote in person or by written proxy.

(c) At a shareholders' meeting, a quorum is any number of

shareholders whose cumulative stock ownership in the domestic

insurance company represents a majority of the company's paid up

capital stock.

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

2003.

Sec. 841.152. BOARD OF DIRECTORS. (a) Subject to the bylaws of

the domestic insurance company, as adopted or amended by the

shareholders or directors, the board of directors has full

management and control of the company.

(b) The board consists of not fewer than five directors. A

director is not required to be a shareholder unless such a

qualification is required by the articles of incorporation or

bylaws of the company.

(c) The directors shall keep a full and correct record of the

board's transactions. The shareholders may inspect those records

during business hours.

(d) The directors shall fill a vacancy that occurs on the board

or in any office of the company.

(e) A majority of the board is a quorum.

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

2003.

Sec. 841.153. ELECTION OF DIRECTORS. (a) After a domestic

insurance company completes the organization of the company under

Section 841.063, the company shall hold an annual meeting of the

company's shareholders on the fourth Tuesday in April at the home

office of the company to elect the company's board of directors.

(b) After the directors are first elected under this section,

the annual meeting must be before May 1 of each year as

established by the company's bylaws. The directors serve one-year

terms beginning immediately after the election, except as

provided by Section 841.154.

(c) If the shareholders do not elect directors at an annual

meeting, the shareholders may elect the directors at a special

shareholders' meeting called for that purpose.

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

2003.

Sec. 841.154. STAGGERED TERMS FOR LARGE BOARD OF DIRECTORS. (a)

This section applies only to a domestic insurance company whose

board of directors consists of at least nine members.

(b) The bylaws of a domestic insurance company may provide that

the company's directors, other than initial directors, may be

elected to serve staggered terms as provided by this section.

(c) The company's directors shall be divided into two or three

classes, with each class consisting of an equal number of

directors to the extent possible. After the directors are divided

into classes:

(1) the terms of the directors in the first class expire on the

first annual meeting date after their initial election;

(2) the terms of the directors in the second class expire on the

second annual meeting date after their initial election; and

(3) the terms of the directors in the third class, if any,

expire on the third annual meeting date after their initial

election.

(d) At each annual meeting after the directors are first

elected, the shareholders shall elect the number of directors

whose terms expire on that date. Directors are elected for:

(1) staggered two-year terms, if the board is divided into two

classes; or

(2) staggered three-year terms, if the board is divided into

three classes.

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

2003.

Sec. 841.155. OFFICERS. (a) A domestic insurance company's

directors shall choose one of the directors to serve as the

company's president.

(b) Other officers of the domestic insurance company shall be

chosen in accordance with the company's bylaws. An officer is not

required to be a shareholder unless such a qualification is

required by the company's articles of incorporation or bylaws. An

officer other than the president is not required to be a director

unless such a qualification is required by the company's bylaws.

(c) The duties and compensation of a domestic insurance

company's officers are as stated in the company's bylaws. If the

bylaws do not state the duties or compensation of the officers,

the directors shall establish the duties or compensation.

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

2003.

Sec. 841.156. AMENDMENT OF CHARTER OR ARTICLES. (a) The

shareholders of a domestic insurance company by resolution may

amend the company's charter or articles of incorporation at any

shareholders' meeting.

(b) The amendment and a copy of the resolution certified by the

president and secretary of the domestic insurance company shall

be filed and recorded in the same manner as the charter.

(c) An amendment of the charter or articles takes effect when it

is recorded.

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

2003.

SUBCHAPTER E. CAPITAL AND SURPLUS

Sec. 841.201. FORM OF REQUIRED CAPITAL AND SURPLUS.

Notwithstanding any other provision of this code, after a charter

is granted under this chapter, the domestic insurance company:

(1) shall maintain the company's minimum capital at all times in

a form described by Section 841.054(c); and

(2) may invest the company's surplus as provided by this code.

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

2003.

Sec. 841.202. AUTHORIZED SHARES. (a) At any shareholders'

meeting, shareholders of a domestic insurance company whose

cumulative stock ownership represents a majority of the capital

stock of the company by resolution may increase or decrease the

amount of the company's capital stock, subject to this section.

(b) Capital stock may never be decreased to an amount that is

less than the minimum amount of paid-up stock required by Section

841.054.

(c) Two officers of the domestic insurance company must sign and

acknowledge a statement of the increase or decrease. The

acknowledged statement and a certified copy of the resolution

shall be filed and recorded in the same manner as the charter.

(d) For an increase or decrease of capital stock, the domestic

insurance company may require the return of the original

certificates evidencing the stock in exchange for new

certificates. An issuance of new certificates that results in a

transfer of stock is subject to Section 841.254.

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

2003.

Sec. 841.203. COMPANY'S REPURCHASE OF STOCK. (a) A legal

reserve life insurance company may purchase in the name of the

company outstanding shares of the company's capital stock as

provided by the Texas Business Corporation Act.

(b) A purchase of stock under this section is not considered an

investment and does not violate the provisions of this code

relating to eligible investments for a legal reserve life

insurance company.

(c) A legal reserve life insurance company that purchases stock

under this section shall file with the department not later than

the 10th day after the date of the purchase a statement that

contains:

(1) the name of each shareholder from whom the shares were

purchased; and

(2) the sum of money paid for those shares.

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

2003.

Sec. 841.204. EXEMPTION FROM REQUIRED INCREASE OF CAPITAL AND

SURPLUS. (a) Except as otherwise provided by this chapter, a

domestic insurance company that after September 1, 1991, had less

than the minimum amount of capital and surplus required for a

newly incorporated company under Section 841.054 may continue to

transact the kinds of business for which it holds a certificate

of authority.

(b) The insurance company shall immediately increase the amount

of its capital to the required amount of capital under Section

841.054 if there is:

(1) a change in the control of at least 50 percent of the voting

securities of the insurance company;

(2) a change in the control of at least 50 percent of the voting

securities of a holding company controlling the insurance

company; or

(3) a change in control of at least 50 percent by any other

method of control if the insurance company or holding company is

not controlled by voting securities.

(c) For purposes of Subsection (b), a transfer of ownership that

occurs because of death, regardless of whether the decedent died

testate or intestate, may not be considered a change in the

control of an insurance company or holding company if ownership

is transferred solely to one or more individuals, each of whom

would be an heir of the decedent if the decedent had died

intestate.

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

2003.

Sec. 841.205. COMMISSIONER MAY REQUIRE LARGER CAPITAL AND

SURPLUS AMOUNTS. (a) The commissioner by rule or guideline may

require a domestic insurance company that writes or assumes a

life insurance or annuity contract or assumes liability on or

indemnifies one person for any risk under an accident and health

insurance policy, or a combination of these policies, in an

amount that exceeds $10,000, to maintain capital and surplus in

amounts that exceed the minimum amounts required by this chapter

because of:

(1) the nature and kind of risks the company underwrites or

reinsures;

(2) the premium volume of risks the company underwrites or

reinsures;

(3) the composition, quality, duration, or liquidity of the

company's investment portfolio;

(4) fluctuations in the market value of securities the company

holds; or

(5) the adequacy of the company's reserves.

(b) A rule adopted under Subsection (a) must be designed to

ensure the financial solvency of an insurance company for the

protection of policyholders but may not require that the total

admitted assets of a company exceed 106 percent of its total

liabilities.

(c) A fraternal benefit society operating under Chapter 885 and

a mutual life insurance company operating under Chapter 882 are

subject to a rule adopted under this section.

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

2003.

Sec. 841.206. IMPAIRMENT OF CAPITAL AND SURPLUS. (a) An

insurance company incorporated or authorized to do the lines of

business authorized in this chapter may not have:

(1) the company's required capital impaired;

(2) more than 90 percent of the company's required minimum

surplus impaired; or

(3) the surplus required under Section 841.205 impaired.

(b) If the commissioner determines that an insurance company's

capital or surplus is impaired in violation of this section, the

commissioner shall:

(1) order the company to immediately reduce the level of

impairment to an acceptable level of impairment as specified by

the commissioner or prohibit the company from engaging in the

business of insurance in this state; and

(2) begin proceedings as necessary to determine any further

actions with respect to the impairment.

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

2003.

Amended by:

Acts 2005, 79th Leg., Ch.

728, Sec. 11.021, eff. September 1, 2005.

Sec. 841.207. ACTIONS OF COMMISSIONER WHEN CAPITAL AND SURPLUS

REQUIREMENTS NOT SATISFIED. If an insurance company does not

comply with the capital and surplus requirements of this chapter,

the commissioner may order the insurance company to cease writing

new business and may:

(1) place the insurance company under state supervision or

conservatorship;

(2) declare the insurance company to be in a hazardous condition

as provided by Subchapter A, Chapter 404;

(3) declare the insurance company to be impaired as provided by

Section 841.206; or

(4) apply to the insurance company any other applicable sanction

provided by this code.

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.022, eff. April 1, 2009.

SUBCHAPTER F. GENERAL POWERS, DUTIES, AND LIMITATIONS

Sec. 841.251. EVIDENCE OF EXPENDITURES. (a) A domestic

insurance company may not make an expenditure of $100 or more

unless the expenditure is evidenced by a voucher that:

(1) is signed by or on behalf of the individual, firm, or

corporation that receives the money; and

(2) describes the consideration received for the payment

correctly.

(b) For an expenditure for both services and disbursements, the

voucher must state the services rendered and disbursement made.

(c) For an expenditure related to a matter pending before a

legislature or public body or a department or officer of a state

or government, the voucher must describe both the nature of the

matter and the interest of the company in the matter correctly.

(d) If the domestic insurance company cannot obtain a voucher as

required by this section, the expenditure must be evidenced by:

(1) a paid check; or

(2) an affidavit that:

(A) describes the nature and purpose of the expenditure; and

(B) states the reason the voucher was not obtained.

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

2003.

Sec. 841.252. PAYMENTS TO OFFICERS, DIRECTORS, AND EMPLOYEES.

(a) Unless first authorized by a vote of a domestic insurance

company's board of directors or a committee of the board that has

the duty to authorize the payments, the company may not pay any

compensation or emolument in an amount that, when added to any

compensation or emolument paid to the person by an affiliated

domestic insurance company, exceeds $150,000 in any year to an

individual, firm, or corporation, including an officer or

director of the company.

(b) Subsection (a) does not prevent a domestic insurance company

from contracting with its agents for the payment of renewal

commissions.

(c) The shareholders of a domestic insurance company may

authorize the creation of one or more plans for the payment of

pensions, retirement benefits, or group insurance for the

company's officers and employees. The shareholders may delegate

to the company's board of directors the power and duty to

prepare, effect, finally approve, administer, and amend a plan.

(d) A mutual insurance company, acting through the company's

policyholders, may exercise the same discretion, and has the same

powers, privileges, and rights, as are conferred on a domestic

insurance company under Subsection (c).

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

2003.

Amended by:

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

94, Sec. 1, eff. September 1, 2009.

Sec. 841.253. LIFE INSURANCE COMPANY'S PAYMENT OF DIVIDENDS.

(a) A life insurance company may declare or pay a dividend to

its:

(1) policyholders only from the expense loading and profits made

by the company; and

(2) shareholders only from the company's earned surplus, as

defined by the commissioner.

(b) A life insurance company that is not showing a profit may

pay a dividend on its participating policies from the expense

loading on those policies.

(c) A life insurance company may not discriminate between

policyholders in paying a dividend from the expense loading under

this section.

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

2003.

Sec. 841.254. TRANSFER OF STOCK. (a) A domestic insurance

company's shares of stock are transferrable on the company's

books, in accordance with law and the bylaws of the company, by

the owner or the owner's authorized agent.

(b) Each person who becomes a shareholder by a transfer of

shares succeeds to all rights of the former holder of those

shares, by reason of that ownership.

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

2003.

Sec. 841.255. ANNUAL STATEMENT; FILING FEE. (a) Not later than

March 1 of each year, a domestic insurance company shall:

(1) prepare a statement showing the condition of the company on

December 31 of the preceding year; and

(2) deliver the statement to the department accompanied by a

filing fee in the amount determined under Chapter 202.

(b) The statement must be under oath of two of the domestic

insurance company's officers and show in detail:

(1) the character of the company's assets and liabilities on

December 31 of the preceding year;

(2) the amount and character of business transacted and money

received during the preceding year;

(3) how money was spent during the preceding year;

(4) the number and amount of the company's policies in force in

this state on that date; and

(5) the total amount of the company's policies in force on that

date.

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.023, eff. April 1, 2009.

Sec. 841.256. BUSINESS IN SEPARATE DEPARTMENTS OF DOMESTIC

INSURANCE COMPANY. A domestic insurance company may not transact

more than one of the kinds of insurance business described by

Section 841.051(a) unless the company establishes separate

departments to transact each kind of business.

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

2003.

Sec. 841.257. KINDS OF BUSINESS LIMITED. An insurance company

authorized to engage in the business of insurance under this

chapter or in accordance with Section 982.051 may not accept a

risk or write an insurance policy in this state or any other

state or country other than:

(1) a life, accident, or health insurance policy;

(2) reinsurance under Sections 492.051(b) and (c) or Chapter 493

by a life insurance company authorized to engage in the business

of insurance in this state; or

(3) reinsurance under Chapter 494 by a domestic insurance

company.

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

2003.

Amended by:

Acts 2005, 79th Leg., Ch.

728, Sec. 11.022, eff. September 1, 2005.

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

730, Sec. 2E.024, eff. April 1, 2009.

Sec. 841.258. AGENTS FOR COMPANY THAT CEASES WRITING NEW

BUSINESS. An insurance company that ceases to write new business

in this state may maintain in this state agents to collect

renewal premiums on outstanding policies the company has written

under its certificate of authority.

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

2003.

Amended by:

Acts 2005, 79th Leg., Ch.

728, Sec. 11.022, eff. September 1, 2005.

Sec. 841.259. ACTIVITIES OF DIRECTORS AND OFFICERS. (a) A

director or officer of an insurance company may not:

(1) receive money or another valuable thing for negotiating,

procuring, recommending, or aiding in a purchase or sale of

property by or a loan from the company; or

(2) have a pecuniary interest, as a principal, coprincipal,

agent, or beneficiary, in a purchase, sale, or loan described by

Subdivision (1).

(b) This section does not prohibit:

(1) a life insurance company from making a loan to a

policyholder in an amount that is not greater than the reserve

value of the policy; or

(2) a transaction, purchase, sale, or loan approved by the

commissioner under Subchapter A of Chapter 805 or Chapter 823.

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

2003.

Sec. 841.260. PROHIBITED COMMISSIONS. (a) In this section,

"contingent compensation" means a commission or other

compensation an insurance company pays to a person that is

contingent on:

(1) the writing or procurement of an insurance policy in the

company;

(2) the procurement of an application for an insurance policy in

the company;

(3) the payment of a renewal premium; or

(4) the assumption of an insurance risk by the company.

(b) A life insurance company that engages in the business of

insurance in this state may not, directly or indirectly, pay or

contract to pay a contingent compensation to:

(1) the president, vice president, secretary, or treasurer of

the company;

(2) any other officer of the company, other than an agent or

solicitor;

(3) an actuary of the company; or

(4) a medical director or other physician of the company whose

duty is to examine risks or applications for insurance for the

company.

(c) This section does not prohibit a plan of compensation to a

marketing officer according to the total amount of insurance the

insurance company writes or to the total amount of insurance in

force with the insurance company during a specified period if:

(1) the commissioner approves the plan under Subchapter A,

Chapter 805;

(2) the marketing officer is not responsible for underwriting,

rating, or otherwise approving the acceptability of insurance

risks; and

(3) the plan does not compensate the marketing officer according

to commissions on individual sales of any insurance product.

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

2003.

Sec. 841.261. CAUSES OF ACTION. (a) A domestic insurance

company may bring an action against any person, including a

policyholder or shareholder of the company, for any cause related

to the company's business.

(b) A policyholder or an heir or legal representative of a

policyholder may bring an action against a domestic insurance

company for a loss that accrues on a policy.

(c) An action enjoining, restraining, or interfering with the

prosecution of a domestic insurance company's business may be

brought only by the department.

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

2003.

SUBCHAPTER G. ISSUANCE OF POLICIES

Sec. 841.301. LIMITS ON AMOUNT OF ACCIDENT AND HEALTH INSURANCE

POLICIES. (a) A domestic insurance company may not assume

liability on or indemnify one person for any risk under one or

more accident, health, or hospitalization insurance policies, or

a combination of those policies, in an amount that exceeds

$10,000, unless the amount of the issued, outstanding, and stated

capital of the company is at least equal to the minimum amount of

capital required for a newly incorporated company under Section

841.054.

(b) A domestic insurance company that before January 1, 2002,

ceases to write or assume liability on, or indemnify any risk

under, a policy described by Subsection (a) in the amount

specified by Subsection (a) and notifies the commissioner of that

action is exempt from the requirements of Subsection (a) until

the date the company resumes writing those policies. A company

that resumes assuming liability on or indemnifying risks under

those policies shall comply with Subsections (a) and (c).

(c) A domestic insurance company that is exempt under Subsection

(b) shall maintain its issued, outstanding, and stated capital in

an amount that is at least $100,000 and is at least:

(1) the amount of capital held by the company on December 31,

1991, plus 10 percent of the difference between that amount and

an amount equal to the minimum amount of capital required for a

newly incorporated company under Section 841.054, if the last

date that the company writes a policy described by Subsection (a)

is during 1993;

(2) the amount of capital held by the company on December 31,

1991, plus 20 percent of the difference between that amount and

an amount equal to the minimum amount of capital required for a

newly incorporated company under Section 841.054, if the last

date that the company writes a policy described by Subsection (a)

is during 1994;

(3) the amount of capital held by the company on December 31,

1991, plus 30 percent of the difference between that amount and

an amount equal to the minimum amount of capital required for a

newly incorporated company under Section 841.054, if the last

date that the company writes a policy described by Subsection (a)

is during 1995;

(4) the amount of capital held by the company on December 31,

1991, plus 40 percent of the difference between that amount and

an amount equal to the minimum amount of capital required for a

newly incorporated company under Section 841.054, if the last

date that the company writes a policy described by Subsection (a)

is during 1996;

(5) the amount of capital held by the company on December 31,

1991, plus 50 percent of the difference between that amount and

an amount equal to the minimum amount of capital required for a

newly incorporated company under Section 841.054, if the last

date that the company writes a policy described by Subsection (a)

is during 1997;

(6) the amount of capital held by the company on December 31,

1991, plus 60 percent of the difference between that amount and

an amount equal to the minimum amount of capital required for a

newly incorporated company under Section 841.054, if the last

date that the company writes a policy described by Subsection (a)

is during 1998;

(7) the amount of capital held by the company on December 31,

1991, plus 70 percent of the difference between that amount and

an amount equal to the minimum amount of capital required for a

newly incorporated company under Section 841.054, if the last

date that the company writes a policy described by Subsection (a)

is during 1999;

(8) the amount of capital held by the company on December 31,

1991, plus 80 percent of the difference between that amount and

an amount equal to the minimum amount of capital required for a

newly incorporated company under Section 841.054, if the last

date that the company writes a policy described by Subsection (a)

is during 2000; and

(9) the amount of capital held by the company on December 31,

1991, plus 90 percent of the difference between that amount and

an amount equal to the minimum amount of capital required for a

newly incorporated company under Section 841.054, if the last

date that the company writes a policy described by Subsection (a)

is during 2001.

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

2003.

Sec. 841.302. LIMITS ON LIFE OR ACCIDENTAL DEATH INSURANCE. (a)

Until the amount of the capital and surplus of a domestic

insurance company is at least $100,000, the company may not

insure any one life for more than $20,000 in the event of death

from natural causes or more than $40,000 in the event of death

from accidental causes.

(b) If the net capital and surplus of a domestic insurance

company is at least $75,001 but less than $100,000, the company,

for any policy issued by the company, shall reinsure the amount

of the benefit that exceeds $4,000 in the event of death from

natural causes and the amount of the benefit that exceeds $8,000

in the event of death from accidental causes.

(c) If the net capital and surplus of a domestic insurance

company is at least $50,001 but less than $75,001, the company,

for any policy issued by the company, shall reinsure the amount

of the benefit that exceeds $3,000 in the event of death from

natural causes and the amount of the benefit that exceeds $6,000

in the event of death from accidental causes.

(d) If the net capital and surplus of a domestic insurance

company is at least $35,001 but less than $50,001, the company,

for any policy issued by the company, shall reinsure the amount

of the benefit that exceeds $2,000 in the event of death from

natural causes and the amount of the benefit that exceeds $4,000

in the event of death from accidental causes.

(e) If the net capital and surplus of a domestic insurance

company is $35,000 or less, the company, for any policy issued by

the company, shall reinsure the amount of the benefit that

exceeds $1,000 in the event of death from natural causes and the

amount of the benefit that exceeds $2,000 in the event of death

from accidental causes.

(f) Benefits under this section must be reinsured with a legal

reserve company that is authorized to engage in the business of

insurance in this state.

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

2003.

Sec. 841.303. ENTIRE CONTRACT. Each policy of insurance issued

or delivered in this state by any life insurance company engaged

in business in this state constitutes the entire contract between

the parties, except that if the application is made a part of the

contract, the policy and the application constitute the entire

contract.

Redesignated from Insurance Code Sec. 1101.003(a) and amended by

Acts 2003, 78th Leg., ch. 1276, Sec. 10A.204(a), eff. Sept. 1,

2003.

SUBCHAPTER H. DEPOSIT OF SECURITIES

Sec. 841.351. DEPOSIT WITH COMPTROLLER. (a) A domestic

insurance company may, at its option, deposit with the

comptroller either:

(1) securities in which the company's capital stock is invested;

or

(2) securities in an amount equal to the amount of the company's

capital stock.

(b) Securities deposited under Subsection (a) must be securities

of a class authorized by the laws of this state for investments

of a domestic insurance company's capital stock.

(c) A domestic insurance company may, at its option, withdraw a

deposit made under Subsection (a), or any portion of the deposit,

after substituting a deposit of securities of a like class and of

an amount and value equal to the withdrawn deposit or portion of

deposit.

(d) The commissioner must first approve any securities deposited

or being substituted under this section.

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

2003.

Sec. 841.352. ISSUANCE OF RECEIPT FOR DEPOSIT. When a domestic

insurance company deposits securities under this subchapter, the

comptroller shall issue to the company a receipt that:

(1) describes the deposit in a manner that identifies the

securities; and

(2) states that the securities are held on deposit as capital

stock investments of the company.

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

2003.

Sec. 841.353. ADVERTISEMENT OF DEPOSIT. A domestic insurance

company that makes a deposit under this subchapter may:

(1) advertise the fact that a deposit has been made; or

(2) print a copy of the receipt for the deposit on any policy

the company issues.

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

2003.

Sec. 841.354. ACCESS TO DEPOSIT. In accordance with reasonable

rules adopted by the comptroller and the commissioner, the proper

officer or agent of a domestic insurance company making a deposit

of securities under this subchapter may at a reasonable time:

(1) examine the deposit;

(2) detach coupons from the securities; and

(3) collect interest on the deposit.

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

2003.

Sec. 841.355. WITHDRAWAL OF DEPOSIT AFTER MERGER, CONSOLIDATION,

OR TOTAL REINSURANCE. (a) When two or more domestic insurance

companies that have two or more deposits of securities under this

subchapter merge, consolidate, or enter into a total reinsurance

contract by which the ceding company is dissolved and its assets

and liabilities are acquired or assumed by the surviving company,

the new, surviving, or reinsuring insurance company, on approval

of the commissioner, may withdraw all of the deposits, except for

the deposit of the greatest amount and value. The new, surviving,

or reinsuring insurance company must demonstrate to the

commissioner that the company is the owner of the deposited

securities before the commissioner approves the withdrawal of

those securities.

(b) In accordance with an order of the commissioner approving a

withdrawal of securities under this section, the comptroller

shall release, transfer, and deliver the withdrawn securities to

their owner.

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

2003.

Sec. 841.356. SITUS OF DEPOSIT FOR TAX PURPOSES. For purposes

of state, county, or municipal taxation, the situs of deposited

securities is the municipality and county in which the depositing

company's home office is located.

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

2003.

Sec. 841.357. MAINTENANCE OF DEPOSIT. A domestic insurance

company must maintain a deposit of securities under this

subchapter as long as the company has outstanding any liability

to a policyholder in this state.

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

2003.

SUBCHAPTER O. ENFORCEMENT AND INTERVENTION

Sec. 841.701. REVOCATION OF CERTIFICATE OF AUTHORITY. (a) If

the commissioner determines that an insurance company that holds

a certificate of authority does not comply with this chapter or

another law described by Section 841.002, the commissioner shall

notify the company that the commissioner intends to revoke its

certificate of authority on the expiration of the 30-day period

after the date actual notice is delivered or mailed under this

section.

(b) Notice under this section must:

(1) be in writing; and

(2) be delivered to an executive officer of the company by

personal service or by registered mail.

(c) If an insurance company receiving notice under this section

does not fully comply before the expiration of the period

prescribed by Subsection (a), the commissioner shall revoke the

company's certificate of authority.

(d) An insurance company whose certificate of authority is

revoked under this section is not entitled to receive another

certificate of authority for a period of one year and until the

company has fully and in good faith complied with this chapter.

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

2003.

Sec. 841.702. APPEAL OF DETERMINATION TO REVOKE CERTIFICATE. An

insurance company aggrieved by an order of the commissioner to

revoke the company's certificate of authority under Section

841.701 may file suit in a court in Travis County to vacate the

order.

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

2003.

Amended by:

Acts 2005, 79th Leg., Ch.

728, Sec. 11.022, eff. September 1, 2005.

Sec. 841.703. CERTIFICATE OF AUTHORITY VOID ON FAILURE TO

SATISFY JUDGMENT. (a) If an officer holding an execution issued

on a final judgment rendered against an insurance company demands

payment of the judgment from an officer or attorney of record of

the company and the company does not fully satisfy the judgment

before the 31st day after the date the demand is made, the

officer shall certify the demand and failure to the commissioner,

regardless of whether the demand is made in this state.

(b) On receipt of a certification under Subsection (a), the

commissioner shall declare void the certificate of authority

issued to the company under this chapter.

(c) An insurance company whose certificate of authority is

declared void under this section may not engage in the business

of insurance in this state until:

(1) the judgment is fully satisfied and discharged; and

(2) the commissioner renews the company's certificate of

authority.

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

2003.

Sec. 841.704. FALSE STATEMENT, REPORT, OR OTHER DOCUMENT;

CRIMINAL PENALTY. (a) A person commits an offense if the person

executes or causes to be executed a statement, report, or other

document required by law to be filed with the commissioner that

contains a material statement or fact that the person knows to be

false.

(b) A person commits an offense if the person is an officer of

an insurance company that is not organized under the laws of this

state and the person files a statement, report, or other document

required by law to be filed with the commissioner that contains a

material statement or fact that the person knows to be false.

(c) An offense under this section is punishable by imprisonment

in the Texas Department of Criminal Justice for a term of not

less than one year.

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. 25.120, eff. September 1, 2009.

Sec. 841.705. PENALTY FOR FAILURE TO INVEST OR REPORT. (a) In

addition to the penalty provided by this subchapter, an insurance

company is subject to a penalty as prescribed by Subsection (b)

if, while holding a certificate of authority to engage in the

business of insurance in this state, or after the company ceases

to write new business or ceases to hold a certificate of

authority, the company intentionally fails or refuses to:

(1) make the investments required by Chapter 425;

(2) make a report required by a law described by Section

841.002;

(3) make any special report requested by the commissioner under

a law described by Section 841.002; or

(4) comply with another provision of a law described by Section

841.002.

(b) A penalty under this s


State Codes and Statutes

State Codes and Statutes

Statutes > Texas > Insurance-code > Title-6-organization-of-insurers-and-related-entities > Chapter-841-life-health-or-accident-insurance-companies

INSURANCE CODE

TITLE 6. ORGANIZATION OF INSURERS AND RELATED ENTITIES

SUBTITLE C. LIFE, HEALTH, AND ACCIDENT INSURERS AND RELATED

ENTITIES

CHAPTER 841. LIFE, HEALTH, OR ACCIDENT INSURANCE COMPANIES

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 841.001. DEFINITIONS.

(1) "Accident insurance company" means a corporation authorized

under a charter to engage in business involving the payment of

money or another thing of value in the event of an injury to or

the disablement or death of an individual as a result of travel

or a general accident by land or water.

(2) "Alien company" means a life, accident, or health insurance

company organized under the laws of a foreign country.

(3) "Beneficiary" is the person to whom an insurance policy is

payable.

(4) "Domestic insurance company," in this chapter and another

law described by Section 841.002, means an insurance company

organized under the laws of this state as:

(A) a life insurance company;

(B) an accident insurance company;

(C) a life and accident insurance company;

(D) a health and accident insurance company; or

(E) a life, health, and accident insurance company.

(5) "Foreign company" means a life, accident, or health

insurance company organized under the laws of another state.

(6) "Health insurance company" means a corporation authorized

under a charter to engage in business involving the payment of

money or another thing of value in the event of loss resulting

from disability incurred as a result of sickness or ill health.

(7) "Home office," with respect to an insurance company, means

the principal office of the company in the state or country under

whose laws the company is organized.

(8) "Insurance company" and "company" include all corporations

engaged as a principal in the business of life, accident, or

health insurance.

(9) "Life insurance company" means a corporation authorized

under a charter to engage in business involving the payment of

money or another thing of value conditioned on the continuance or

cessation of human life or involving an insurance, guaranty, or

contract for the payment of an endowment or annuity.

(10) "Policyholder" and "insured" mean the individual on whose

life an insurance policy is effected.

(11) "Profits," with respect to an insurance company, means the

portion of the company's funds that are not:

(A) required for the payment of losses and expenses; or

(B) set aside for any other purpose required by law.

(12) "United States branch" means:

(A) the business unit through which business is transacted

within the United States by an alien company;

(B) the assets and liabilities of the company within the United

States pertaining to the business;

(C) the management powers pertaining to the business and to the

assets and liabilities; or

(D) any combination of the items described by Paragraphs

(A)-(C).

(13) The definitions of "company" and "insurance company" apply

to this chapter and another law described by Section 841.002

unless a different meaning is plainly required by the context in

which the term appears.

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

2003.

Sec. 841.002. APPLICABILITY OF CHAPTER AND OTHER LAW. Except as

otherwise expressly provided by this code, each insurance company

incorporated or engaging in business in this state as a life

insurance company, an accident insurance company, a life and

accident insurance company, a health and accident insurance

company, or a life, health, and accident insurance company is

subject to:

(1) this chapter;

(2) Chapter 3;

(3) Chapters 425 and 492;

(4) Title 7;

(5) Sections 1202.051, 1204.151, 1204.153, and 1204.154;

(6) Subchapter A, Chapter 1202, Subchapters A and F, Chapter

1204, Subchapter A, Chapter 1273, Subchapters A, B, and D,

Chapter 1355, and Subchapter A, Chapter 1366;

(7) Subchapter A, Chapter 1507;

(8) Chapters 1203, 1210, 1251-1254, 1301, 1351, 1354, 1359,

1364, 1368, 1505, 1506, 1651, 1652, and 1701; and

(9) Chapter 177, Local Government Code.

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.018, eff. April 1, 2009.

Sec. 841.003. APPLICABILITY OF LAW GOVERNING CORPORATIONS. An

insurance company operating under this chapter is subject to the

Texas Business Corporation Act, the Texas Miscellaneous

Corporation Laws Act (Article 1302-1.01 et seq., Vernon's Texas

Civil Statutes), and any other law of this state that governs

corporations in general to the extent those laws are not

inconsistent with this chapter or another law described by

Section 841.002.

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

2003.

Sec. 841.004. NET ASSETS DEFINED; RULES. (a) A company's "net

assets" consist of the company's funds that are available for the

payment of a company's obligations in this state, including:

(1) uncollected premiums that are not more than three months

past due and deferred premiums on policies actually in force,

after the deduction of:

(A) all unpaid losses and claims;

(B) all claims for losses; and

(C) all other debts, exclusive of capital stock; and

(2) if the total value of the equipment exceeds $2,000, the

value of all electronic machines that comprise a data processing

system or systems and of all other office equipment, furniture,

machines, and labor-saving devices purchased for and used in

connection with the business of the insurance company to the

extent that the total actual cash market value of those assets is

less than 10 percent of the other admitted assets of the company.

(b) The commissioner may adopt rules defining electronic

machines and systems, office equipment, furniture, machines, and

labor-saving devices described by Subsection (a) and stating the

maximum period for which each class of equipment may be

amortized.

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

2003.

SUBCHAPTER B. FORMATION AND STRUCTURE OF DOMESTIC COMPANIES

Sec. 841.051. FORMATION OF COMPANY. (a) Three or more

residents of this state may form:

(1) a life insurance company;

(2) an accident insurance company;

(3) a life and accident insurance company;

(4) a health and accident insurance company; or

(5) a life, health, and accident insurance company.

(b) To form a domestic insurance company:

(1) each incorporator must sign and acknowledge the articles of

incorporation of the company; and

(2) the incorporators must file the articles of incorporation

with the department.

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

2003.

Sec. 841.052. ARTICLES OF INCORPORATION. (a) Articles of

incorporation of a proposed domestic insurance company must

state:

(1) the name of the company;

(2) the location of the company's home office;

(3) the kinds of insurance business in which the company

proposes to engage;

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

(5) the amount of the company's capital stock;

(6) the number of shares of the company's capital stock;

(7) the amount of the company's surplus; and

(8) the period of the company's duration, which may be

perpetual.

(b) The incorporators of a domestic insurance company may

include in the articles of incorporation other provisions that

are not inconsistent with law.

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

2003.

Sec. 841.053. COMPANY NAME. (a) The name of a domestic

insurance company must contain the words "Insurance Company."

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

the name of another domestic insurance company as to likely

mislead the public.

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

2003.

Sec. 841.054. CAPITAL STOCK AND SURPLUS REQUIREMENTS. (a) A

domestic insurance company must have capital stock in an amount

of at least $700,000 and surplus in an amount of at least

$700,000.

(b) All of the capital stock required by Subsection (a) must be

fully subscribed and paid up and delivered to the incorporators

before the articles of incorporation are filed.

(c) At the time of incorporation, the required capital and

surplus shall consist only of:

(1) United States currency;

(2) bonds of the United States, this state, or a county or

municipality of this state; or

(3) government insured mortgage loans that are authorized by

this chapter or Chapter 425, with not more than 50 percent of the

required capital invested in first mortgage real property loans.

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.019, eff. April 1, 2009.

Sec. 841.055. SHARES OF STOCK. (a) The shares of stock of an

insurance company operating under this chapter may be divided or

converted into shares of stock with a par value or shares of

stock without par value or into a combination of shares with or

without par value.

(b) Each issued share of stock must be fully paid for and

nonassessable.

(c) The insurance company by an amendment to its charter may

increase or decrease the total number of shares of stock the

company is authorized to issue if:

(1) shares representing at least 50 percent of the total par

value of the authorized shares with a par value, if any, have

been in good faith subscribed and fully paid for; and

(2) shares representing at least 50 percent of the total number

of the authorized shares without a par value, if any, have been

in good faith subscribed and fully paid for.

(d) Authorized but unissued shares of stock of an insurance

company are not considered capital, stock, or capital stock of

the company.

(e) This section and Sections 841.056 and 841.057 do not impair

the charter rights of an insurance company authorized to issue

shares of stock with or without a par value before September 6,

1955.

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

2003.

Sec. 841.056. REQUIREMENTS FOR SHARES OF STOCK WITH PAR VALUE.

(a) The shares of stock of an insurance company operating under

this chapter that are divided or converted into par value shares,

if any, must have a par value of not less than $1 or more than

$100.

(b) Each par value share of stock must be fully paid for before

issuance in an amount that is not less than the share's par

value.

(c) When an application for charter or an amendment to the

charter authorizing the issuance of shares of stock with a par

value is filed, the insurance company shall file with the

department a statement under oath stating:

(1) the total number of par value shares subscribed; and

(2) the actual total consideration the company received for

those shares.

(d) The shareholders of an insurance company authorizing par

value shares of stock must in good faith subscribe and fully pay

for shares representing at least 50 percent of the total par

value of the authorized shares with a par value before the

company:

(1) is granted a charter; or

(2) amends its charter to authorize the issuance of par value

shares.

(e) If all of the authorized par value shares of stock are not

subscribed and paid for when the charter is granted or the

amendment is filed, respectively, the insurance company shall

file with the department a certificate authenticated by a

majority of the directors stating the total number of par value

shares issued and the actual total consideration received for

those shares. The company shall file the certificate not later

than the 90th day after the date of issuance of those remaining

shares. The company is not required to file an amendment to its

charter or take further action to effect the increase in the

capital and surplus of the company.

(f) The actual consideration received by an insurance company

for a par value share constitutes capital to the extent of its

par value and the remainder, if any, constitutes surplus.

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

2003.

Sec. 841.057. REQUIREMENTS FOR SHARES OF STOCK WITHOUT PAR

VALUE. (a) The shares of stock of an insurance company

operating under this chapter that are divided or converted into

shares without par value, if any, must be equal in all respects.

(b) An insurance company may issue and dispose of authorized

shares without par value for money or for notes, mortgages, and

stocks in the form authorized by law for capital stock of

insurance companies. Each share of stock without par value must

be fully paid before issuance. After the company receives payment

for a share of stock issued under this section, the share is not

subject to additional call or assessment, and the subscriber or

holder of the share is not required to make an additional payment

with respect to the share.

(c) The shareholders of an insurance company authorizing shares

of stock without par value must in good faith subscribe and pay

for shares representing at least 50 percent of the authorized

shares without par value before the company is granted a charter

or has its charter amended to authorize the issuance of shares

without par value. The total amount paid for the shares must be

at least $250,000.

(d) When an application for charter or an amendment to the

charter authorizing the issuance of shares without par value is

filed, the insurance company shall file with the department a

statement under oath stating:

(1) the number of shares without par value subscribed; and

(2) the actual consideration the company received for those

shares.

(e) If all of the authorized shares of stock without par value

are not subscribed and paid for when the charter is granted or

the amendment is filed, respectively, the insurance company shall

file with the department a certificate authenticated by a

majority of the directors stating the number of shares without

par value issued and the consideration received for those shares.

(f) The insurance company shall file the certificate required by

Subsection (e) not later than the 90th day after the date of

issuance of those remaining shares. The portion of the

consideration received for shares without par value that is

designated as capital by the company's directors, or by the

company's shareholders if the charter or articles of

incorporation reserve the right to make that determination to the

shareholders, constitutes capital and the remainder, if any,

constitutes surplus. The company is not required to file an

amendment to its charter or take further action to effect the

increase in the capital and surplus of the company.

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

2003.

Sec. 841.058. APPLICATION FOR CHARTER. (a) To obtain a charter

for a domestic insurance company, the incorporators must pay to

the department the charter fee in an amount determined under

Chapter 202 and file with the department:

(1) an application for charter on the form and containing the

information prescribed by the commissioner;

(2) the company's articles of incorporation; and

(3) an affidavit made by two or more of the incorporators that

states that:

(A) the minimum capital and surplus requirements of Section

841.054 are satisfied;

(B) the capital and surplus are the bona fide property of the

company; and

(C) the information in the articles of incorporation is true and

correct.

(b) The commissioner may require that the incorporators provide

at their expense additional evidence of a matter required in the

affidavit before the commissioner takes further action on the

application for charter.

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.020, eff. April 1, 2009.

Sec. 841.059. ACTION BY COMMISSIONER AND DEPARTMENT AFTER

FILING. (a) After the charter fee is paid and all items

required for a charter under Section 841.058 are filed with the

department, the department shall make or cause to be made a full

and thorough examination of the domestic insurance company.

(b) The domestic insurance company shall pay for the examination

under Subsection (a)(2).

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

2003.

Amended by:

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

1022, Sec. 8, eff. June 19, 2009.

Sec. 841.061. ACTION ON APPLICATION. (a) In considering the

application, the commissioner shall determine if:

(1) the minimum capital and surplus required by Section 841.054

are the bona fide property of the domestic insurance company;

(2) the proposed officers, directors, and managing executive of

the company have sufficient insurance experience, ability, and

standing to make success of the proposed company probable; and

(3) the applicants are acting in good faith.

(b) If the commissioner determines that the applicant has not

met the standards set out by Subsection (a), the commissioner

shall deny the application in writing, giving the reason for the

denial. An application may not be granted unless it is

adequately supported by competent evidence.

(b-1) On the applicant's request, the commissioner shall hold a

hearing on a denial. Not later than the 30th day after the date

of the applicant's request for a hearing, the commissioner shall

request a hearing date.

(b-2) An interested party may participate fully and in all

respects in any proceeding related to the application. An

intervenor has the rights and privileges of a proper or necessary

party in a civil suit in the courts of this state, including the

right to be represented by counsel.

(c) If the commissioner does not deny the application under

Subsection (b), the commissioner shall approve the application.

On approval of an application, the department shall record the

information required by Section 841.058 in records maintained for

that purpose. On receipt of a fee in the amount determined under

Chapter 202, the commissioner shall provide to the incorporators

a certified copy of the application, articles of incorporation,

and submitted affidavit.

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.021, eff. April 1, 2009.

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

1022, Sec. 9, eff. June 19, 2009.

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

1022, Sec. 10, eff. June 19, 2009.

Sec. 841.062. BEGINNING OF CORPORATE EXISTENCE. On receipt of

the certified copy of documents under Section 841.061(c), the

domestic insurance company becomes a body politic and corporate,

and the incorporators may complete organization of the company

under Section 841.063.

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

2003.

Sec. 841.063. ORGANIZATION MEETING. (a) After receipt of the

certified copy of documents under Section 841.061(c), the

incorporators shall promptly call a meeting of the domestic

insurance company's shareholders. The shareholders shall:

(1) adopt bylaws to govern the company; and

(2) elect the company's initial board of directors.

(b) The directors elected under this section serve until

directors are first elected under Section 841.153.

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

2003.

SUBCHAPTER C. AUTHORITY TO ENGAGE IN BUSINESS

Sec. 841.101. CERTIFICATE OF AUTHORITY REQUIRED. A domestic

insurance company may not engage in the business of insurance in

this state, except for the lending of money, without first

obtaining from the commissioner a certificate of authority that:

(1) shows that the company has fully complied with the laws of

this state; and

(2) authorizes the company to engage in the business of

insurance in this state.

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

2003.

Sec. 841.102. SCHEDULE OF ASSETS. Two or more officers of the

domestic insurance company shall execute and file with the

department:

(1) a sworn schedule of each of the assets of the company

exhibited to the department during the examination under Section

841.059 showing the value of the assets; and

(2) a sworn statement that the assets are the bona fide,

unconditional, and unencumbered property of the company and are

worth the amount stated in the schedule.

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

2003.

Sec. 841.103. ISSUANCE OF CERTIFICATE OF AUTHORITY. (a) If the

commissioner makes a determination favorable to the applicants on

all issues under Section 841.061(a), the commissioner, on

compliance with the requirements of Section 841.102, shall issue

to the domestic insurance company a certificate of authority

authorizing the company to engage in the kinds of business

authorized by the company's charter.

(b) On written request of a domestic insurance company, the

commissioner shall provide a certified copy of the company's

certificate of authority to the company for each of the company's

agents in this state.

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

2003.

Sec. 841.104. TAX PAYMENT REQUIRED FOR ISSUANCE OF CERTAIN

CERTIFICATES OF AUTHORITY. (a) This section applies to a life

insurance company that:

(1) has previously held a certificate of authority to engage in

the business of life insurance in this state;

(2) ceased to write new business in this state under that

certificate of authority; and

(3) after ceasing to write new business, continued to collect

from residents of this state renewal or other premiums on

policies written under that certificate of authority.

(b) A life insurance company to which this section applies may

not obtain a new certificate of authority to engage in the

business of life insurance in this state until the company:

(1) files with the department under oath a report that discloses

the gross amount of renewal or other premiums received each

calendar year from residents of this state after the period

covered by the company's last tax report of gross premium

receipts filed under this code; and

(2) pays to the state occupation taxes on those premiums.

(c) The life insurance company shall pay the occupation tax for

each year of nonpayment. The company shall pay the tax for each

year at the same rate for that year as a company engaged in the

business of life insurance in this state during that year.

(d) The life insurance company shall remit the penalties for

failure to pay the taxes and file required reports when the

company pays the taxes and receives a certificate of authority.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 17, eff. April 1,

2005.

SUBCHAPTER D. MANAGEMENT OF COMPANY

Sec. 841.151. CONDUCTING SHAREHOLDERS' MEETING. (a) At a

meeting of a domestic insurance company's shareholders, each

shareholder is entitled to one vote for each fully paid up share

of stock appearing in the shareholder's name on the company's

books, except to the extent that the articles of incorporation

increase, limit, or deny voting rights to the holders of the

shares of a class of stock as authorized by the Texas Business

Corporation Act.

(b) A shareholder may vote in person or by written proxy.

(c) At a shareholders' meeting, a quorum is any number of

shareholders whose cumulative stock ownership in the domestic

insurance company represents a majority of the company's paid up

capital stock.

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

2003.

Sec. 841.152. BOARD OF DIRECTORS. (a) Subject to the bylaws of

the domestic insurance company, as adopted or amended by the

shareholders or directors, the board of directors has full

management and control of the company.

(b) The board consists of not fewer than five directors. A

director is not required to be a shareholder unless such a

qualification is required by the articles of incorporation or

bylaws of the company.

(c) The directors shall keep a full and correct record of the

board's transactions. The shareholders may inspect those records

during business hours.

(d) The directors shall fill a vacancy that occurs on the board

or in any office of the company.

(e) A majority of the board is a quorum.

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

2003.

Sec. 841.153. ELECTION OF DIRECTORS. (a) After a domestic

insurance company completes the organization of the company under

Section 841.063, the company shall hold an annual meeting of the

company's shareholders on the fourth Tuesday in April at the home

office of the company to elect the company's board of directors.

(b) After the directors are first elected under this section,

the annual meeting must be before May 1 of each year as

established by the company's bylaws. The directors serve one-year

terms beginning immediately after the election, except as

provided by Section 841.154.

(c) If the shareholders do not elect directors at an annual

meeting, the shareholders may elect the directors at a special

shareholders' meeting called for that purpose.

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

2003.

Sec. 841.154. STAGGERED TERMS FOR LARGE BOARD OF DIRECTORS. (a)

This section applies only to a domestic insurance company whose

board of directors consists of at least nine members.

(b) The bylaws of a domestic insurance company may provide that

the company's directors, other than initial directors, may be

elected to serve staggered terms as provided by this section.

(c) The company's directors shall be divided into two or three

classes, with each class consisting of an equal number of

directors to the extent possible. After the directors are divided

into classes:

(1) the terms of the directors in the first class expire on the

first annual meeting date after their initial election;

(2) the terms of the directors in the second class expire on the

second annual meeting date after their initial election; and

(3) the terms of the directors in the third class, if any,

expire on the third annual meeting date after their initial

election.

(d) At each annual meeting after the directors are first

elected, the shareholders shall elect the number of directors

whose terms expire on that date. Directors are elected for:

(1) staggered two-year terms, if the board is divided into two

classes; or

(2) staggered three-year terms, if the board is divided into

three classes.

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

2003.

Sec. 841.155. OFFICERS. (a) A domestic insurance company's

directors shall choose one of the directors to serve as the

company's president.

(b) Other officers of the domestic insurance company shall be

chosen in accordance with the company's bylaws. An officer is not

required to be a shareholder unless such a qualification is

required by the company's articles of incorporation or bylaws. An

officer other than the president is not required to be a director

unless such a qualification is required by the company's bylaws.

(c) The duties and compensation of a domestic insurance

company's officers are as stated in the company's bylaws. If the

bylaws do not state the duties or compensation of the officers,

the directors shall establish the duties or compensation.

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

2003.

Sec. 841.156. AMENDMENT OF CHARTER OR ARTICLES. (a) The

shareholders of a domestic insurance company by resolution may

amend the company's charter or articles of incorporation at any

shareholders' meeting.

(b) The amendment and a copy of the resolution certified by the

president and secretary of the domestic insurance company shall

be filed and recorded in the same manner as the charter.

(c) An amendment of the charter or articles takes effect when it

is recorded.

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

2003.

SUBCHAPTER E. CAPITAL AND SURPLUS

Sec. 841.201. FORM OF REQUIRED CAPITAL AND SURPLUS.

Notwithstanding any other provision of this code, after a charter

is granted under this chapter, the domestic insurance company:

(1) shall maintain the company's minimum capital at all times in

a form described by Section 841.054(c); and

(2) may invest the company's surplus as provided by this code.

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

2003.

Sec. 841.202. AUTHORIZED SHARES. (a) At any shareholders'

meeting, shareholders of a domestic insurance company whose

cumulative stock ownership represents a majority of the capital

stock of the company by resolution may increase or decrease the

amount of the company's capital stock, subject to this section.

(b) Capital stock may never be decreased to an amount that is

less than the minimum amount of paid-up stock required by Section

841.054.

(c) Two officers of the domestic insurance company must sign and

acknowledge a statement of the increase or decrease. The

acknowledged statement and a certified copy of the resolution

shall be filed and recorded in the same manner as the charter.

(d) For an increase or decrease of capital stock, the domestic

insurance company may require the return of the original

certificates evidencing the stock in exchange for new

certificates. An issuance of new certificates that results in a

transfer of stock is subject to Section 841.254.

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

2003.

Sec. 841.203. COMPANY'S REPURCHASE OF STOCK. (a) A legal

reserve life insurance company may purchase in the name of the

company outstanding shares of the company's capital stock as

provided by the Texas Business Corporation Act.

(b) A purchase of stock under this section is not considered an

investment and does not violate the provisions of this code

relating to eligible investments for a legal reserve life

insurance company.

(c) A legal reserve life insurance company that purchases stock

under this section shall file with the department not later than

the 10th day after the date of the purchase a statement that

contains:

(1) the name of each shareholder from whom the shares were

purchased; and

(2) the sum of money paid for those shares.

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

2003.

Sec. 841.204. EXEMPTION FROM REQUIRED INCREASE OF CAPITAL AND

SURPLUS. (a) Except as otherwise provided by this chapter, a

domestic insurance company that after September 1, 1991, had less

than the minimum amount of capital and surplus required for a

newly incorporated company under Section 841.054 may continue to

transact the kinds of business for which it holds a certificate

of authority.

(b) The insurance company shall immediately increase the amount

of its capital to the required amount of capital under Section

841.054 if there is:

(1) a change in the control of at least 50 percent of the voting

securities of the insurance company;

(2) a change in the control of at least 50 percent of the voting

securities of a holding company controlling the insurance

company; or

(3) a change in control of at least 50 percent by any other

method of control if the insurance company or holding company is

not controlled by voting securities.

(c) For purposes of Subsection (b), a transfer of ownership that

occurs because of death, regardless of whether the decedent died

testate or intestate, may not be considered a change in the

control of an insurance company or holding company if ownership

is transferred solely to one or more individuals, each of whom

would be an heir of the decedent if the decedent had died

intestate.

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

2003.

Sec. 841.205. COMMISSIONER MAY REQUIRE LARGER CAPITAL AND

SURPLUS AMOUNTS. (a) The commissioner by rule or guideline may

require a domestic insurance company that writes or assumes a

life insurance or annuity contract or assumes liability on or

indemnifies one person for any risk under an accident and health

insurance policy, or a combination of these policies, in an

amount that exceeds $10,000, to maintain capital and surplus in

amounts that exceed the minimum amounts required by this chapter

because of:

(1) the nature and kind of risks the company underwrites or

reinsures;

(2) the premium volume of risks the company underwrites or

reinsures;

(3) the composition, quality, duration, or liquidity of the

company's investment portfolio;

(4) fluctuations in the market value of securities the company

holds; or

(5) the adequacy of the company's reserves.

(b) A rule adopted under Subsection (a) must be designed to

ensure the financial solvency of an insurance company for the

protection of policyholders but may not require that the total

admitted assets of a company exceed 106 percent of its total

liabilities.

(c) A fraternal benefit society operating under Chapter 885 and

a mutual life insurance company operating under Chapter 882 are

subject to a rule adopted under this section.

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

2003.

Sec. 841.206. IMPAIRMENT OF CAPITAL AND SURPLUS. (a) An

insurance company incorporated or authorized to do the lines of

business authorized in this chapter may not have:

(1) the company's required capital impaired;

(2) more than 90 percent of the company's required minimum

surplus impaired; or

(3) the surplus required under Section 841.205 impaired.

(b) If the commissioner determines that an insurance company's

capital or surplus is impaired in violation of this section, the

commissioner shall:

(1) order the company to immediately reduce the level of

impairment to an acceptable level of impairment as specified by

the commissioner or prohibit the company from engaging in the

business of insurance in this state; and

(2) begin proceedings as necessary to determine any further

actions with respect to the impairment.

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

2003.

Amended by:

Acts 2005, 79th Leg., Ch.

728, Sec. 11.021, eff. September 1, 2005.

Sec. 841.207. ACTIONS OF COMMISSIONER WHEN CAPITAL AND SURPLUS

REQUIREMENTS NOT SATISFIED. If an insurance company does not

comply with the capital and surplus requirements of this chapter,

the commissioner may order the insurance company to cease writing

new business and may:

(1) place the insurance company under state supervision or

conservatorship;

(2) declare the insurance company to be in a hazardous condition

as provided by Subchapter A, Chapter 404;

(3) declare the insurance company to be impaired as provided by

Section 841.206; or

(4) apply to the insurance company any other applicable sanction

provided by this code.

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.022, eff. April 1, 2009.

SUBCHAPTER F. GENERAL POWERS, DUTIES, AND LIMITATIONS

Sec. 841.251. EVIDENCE OF EXPENDITURES. (a) A domestic

insurance company may not make an expenditure of $100 or more

unless the expenditure is evidenced by a voucher that:

(1) is signed by or on behalf of the individual, firm, or

corporation that receives the money; and

(2) describes the consideration received for the payment

correctly.

(b) For an expenditure for both services and disbursements, the

voucher must state the services rendered and disbursement made.

(c) For an expenditure related to a matter pending before a

legislature or public body or a department or officer of a state

or government, the voucher must describe both the nature of the

matter and the interest of the company in the matter correctly.

(d) If the domestic insurance company cannot obtain a voucher as

required by this section, the expenditure must be evidenced by:

(1) a paid check; or

(2) an affidavit that:

(A) describes the nature and purpose of the expenditure; and

(B) states the reason the voucher was not obtained.

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

2003.

Sec. 841.252. PAYMENTS TO OFFICERS, DIRECTORS, AND EMPLOYEES.

(a) Unless first authorized by a vote of a domestic insurance

company's board of directors or a committee of the board that has

the duty to authorize the payments, the company may not pay any

compensation or emolument in an amount that, when added to any

compensation or emolument paid to the person by an affiliated

domestic insurance company, exceeds $150,000 in any year to an

individual, firm, or corporation, including an officer or

director of the company.

(b) Subsection (a) does not prevent a domestic insurance company

from contracting with its agents for the payment of renewal

commissions.

(c) The shareholders of a domestic insurance company may

authorize the creation of one or more plans for the payment of

pensions, retirement benefits, or group insurance for the

company's officers and employees. The shareholders may delegate

to the company's board of directors the power and duty to

prepare, effect, finally approve, administer, and amend a plan.

(d) A mutual insurance company, acting through the company's

policyholders, may exercise the same discretion, and has the same

powers, privileges, and rights, as are conferred on a domestic

insurance company under Subsection (c).

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

2003.

Amended by:

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

94, Sec. 1, eff. September 1, 2009.

Sec. 841.253. LIFE INSURANCE COMPANY'S PAYMENT OF DIVIDENDS.

(a) A life insurance company may declare or pay a dividend to

its:

(1) policyholders only from the expense loading and profits made

by the company; and

(2) shareholders only from the company's earned surplus, as

defined by the commissioner.

(b) A life insurance company that is not showing a profit may

pay a dividend on its participating policies from the expense

loading on those policies.

(c) A life insurance company may not discriminate between

policyholders in paying a dividend from the expense loading under

this section.

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

2003.

Sec. 841.254. TRANSFER OF STOCK. (a) A domestic insurance

company's shares of stock are transferrable on the company's

books, in accordance with law and the bylaws of the company, by

the owner or the owner's authorized agent.

(b) Each person who becomes a shareholder by a transfer of

shares succeeds to all rights of the former holder of those

shares, by reason of that ownership.

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

2003.

Sec. 841.255. ANNUAL STATEMENT; FILING FEE. (a) Not later than

March 1 of each year, a domestic insurance company shall:

(1) prepare a statement showing the condition of the company on

December 31 of the preceding year; and

(2) deliver the statement to the department accompanied by a

filing fee in the amount determined under Chapter 202.

(b) The statement must be under oath of two of the domestic

insurance company's officers and show in detail:

(1) the character of the company's assets and liabilities on

December 31 of the preceding year;

(2) the amount and character of business transacted and money

received during the preceding year;

(3) how money was spent during the preceding year;

(4) the number and amount of the company's policies in force in

this state on that date; and

(5) the total amount of the company's policies in force on that

date.

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.023, eff. April 1, 2009.

Sec. 841.256. BUSINESS IN SEPARATE DEPARTMENTS OF DOMESTIC

INSURANCE COMPANY. A domestic insurance company may not transact

more than one of the kinds of insurance business described by

Section 841.051(a) unless the company establishes separate

departments to transact each kind of business.

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

2003.

Sec. 841.257. KINDS OF BUSINESS LIMITED. An insurance company

authorized to engage in the business of insurance under this

chapter or in accordance with Section 982.051 may not accept a

risk or write an insurance policy in this state or any other

state or country other than:

(1) a life, accident, or health insurance policy;

(2) reinsurance under Sections 492.051(b) and (c) or Chapter 493

by a life insurance company authorized to engage in the business

of insurance in this state; or

(3) reinsurance under Chapter 494 by a domestic insurance

company.

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

2003.

Amended by:

Acts 2005, 79th Leg., Ch.

728, Sec. 11.022, eff. September 1, 2005.

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

730, Sec. 2E.024, eff. April 1, 2009.

Sec. 841.258. AGENTS FOR COMPANY THAT CEASES WRITING NEW

BUSINESS. An insurance company that ceases to write new business

in this state may maintain in this state agents to collect

renewal premiums on outstanding policies the company has written

under its certificate of authority.

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

2003.

Amended by:

Acts 2005, 79th Leg., Ch.

728, Sec. 11.022, eff. September 1, 2005.

Sec. 841.259. ACTIVITIES OF DIRECTORS AND OFFICERS. (a) A

director or officer of an insurance company may not:

(1) receive money or another valuable thing for negotiating,

procuring, recommending, or aiding in a purchase or sale of

property by or a loan from the company; or

(2) have a pecuniary interest, as a principal, coprincipal,

agent, or beneficiary, in a purchase, sale, or loan described by

Subdivision (1).

(b) This section does not prohibit:

(1) a life insurance company from making a loan to a

policyholder in an amount that is not greater than the reserve

value of the policy; or

(2) a transaction, purchase, sale, or loan approved by the

commissioner under Subchapter A of Chapter 805 or Chapter 823.

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

2003.

Sec. 841.260. PROHIBITED COMMISSIONS. (a) In this section,

"contingent compensation" means a commission or other

compensation an insurance company pays to a person that is

contingent on:

(1) the writing or procurement of an insurance policy in the

company;

(2) the procurement of an application for an insurance policy in

the company;

(3) the payment of a renewal premium; or

(4) the assumption of an insurance risk by the company.

(b) A life insurance company that engages in the business of

insurance in this state may not, directly or indirectly, pay or

contract to pay a contingent compensation to:

(1) the president, vice president, secretary, or treasurer of

the company;

(2) any other officer of the company, other than an agent or

solicitor;

(3) an actuary of the company; or

(4) a medical director or other physician of the company whose

duty is to examine risks or applications for insurance for the

company.

(c) This section does not prohibit a plan of compensation to a

marketing officer according to the total amount of insurance the

insurance company writes or to the total amount of insurance in

force with the insurance company during a specified period if:

(1) the commissioner approves the plan under Subchapter A,

Chapter 805;

(2) the marketing officer is not responsible for underwriting,

rating, or otherwise approving the acceptability of insurance

risks; and

(3) the plan does not compensate the marketing officer according

to commissions on individual sales of any insurance product.

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

2003.

Sec. 841.261. CAUSES OF ACTION. (a) A domestic insurance

company may bring an action against any person, including a

policyholder or shareholder of the company, for any cause related

to the company's business.

(b) A policyholder or an heir or legal representative of a

policyholder may bring an action against a domestic insurance

company for a loss that accrues on a policy.

(c) An action enjoining, restraining, or interfering with the

prosecution of a domestic insurance company's business may be

brought only by the department.

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

2003.

SUBCHAPTER G. ISSUANCE OF POLICIES

Sec. 841.301. LIMITS ON AMOUNT OF ACCIDENT AND HEALTH INSURANCE

POLICIES. (a) A domestic insurance company may not assume

liability on or indemnify one person for any risk under one or

more accident, health, or hospitalization insurance policies, or

a combination of those policies, in an amount that exceeds

$10,000, unless the amount of the issued, outstanding, and stated

capital of the company is at least equal to the minimum amount of

capital required for a newly incorporated company under Section

841.054.

(b) A domestic insurance company that before January 1, 2002,

ceases to write or assume liability on, or indemnify any risk

under, a policy described by Subsection (a) in the amount

specified by Subsection (a) and notifies the commissioner of that

action is exempt from the requirements of Subsection (a) until

the date the company resumes writing those policies. A company

that resumes assuming liability on or indemnifying risks under

those policies shall comply with Subsections (a) and (c).

(c) A domestic insurance company that is exempt under Subsection

(b) shall maintain its issued, outstanding, and stated capital in

an amount that is at least $100,000 and is at least:

(1) the amount of capital held by the company on December 31,

1991, plus 10 percent of the difference between that amount and

an amount equal to the minimum amount of capital required for a

newly incorporated company under Section 841.054, if the last

date that the company writes a policy described by Subsection (a)

is during 1993;

(2) the amount of capital held by the company on December 31,

1991, plus 20 percent of the difference between that amount and

an amount equal to the minimum amount of capital required for a

newly incorporated company under Section 841.054, if the last

date that the company writes a policy described by Subsection (a)

is during 1994;

(3) the amount of capital held by the company on December 31,

1991, plus 30 percent of the difference between that amount and

an amount equal to the minimum amount of capital required for a

newly incorporated company under Section 841.054, if the last

date that the company writes a policy described by Subsection (a)

is during 1995;

(4) the amount of capital held by the company on December 31,

1991, plus 40 percent of the difference between that amount and

an amount equal to the minimum amount of capital required for a

newly incorporated company under Section 841.054, if the last

date that the company writes a policy described by Subsection (a)

is during 1996;

(5) the amount of capital held by the company on December 31,

1991, plus 50 percent of the difference between that amount and

an amount equal to the minimum amount of capital required for a

newly incorporated company under Section 841.054, if the last

date that the company writes a policy described by Subsection (a)

is during 1997;

(6) the amount of capital held by the company on December 31,

1991, plus 60 percent of the difference between that amount and

an amount equal to the minimum amount of capital required for a

newly incorporated company under Section 841.054, if the last

date that the company writes a policy described by Subsection (a)

is during 1998;

(7) the amount of capital held by the company on December 31,

1991, plus 70 percent of the difference between that amount and

an amount equal to the minimum amount of capital required for a

newly incorporated company under Section 841.054, if the last

date that the company writes a policy described by Subsection (a)

is during 1999;

(8) the amount of capital held by the company on December 31,

1991, plus 80 percent of the difference between that amount and

an amount equal to the minimum amount of capital required for a

newly incorporated company under Section 841.054, if the last

date that the company writes a policy described by Subsection (a)

is during 2000; and

(9) the amount of capital held by the company on December 31,

1991, plus 90 percent of the difference between that amount and

an amount equal to the minimum amount of capital required for a

newly incorporated company under Section 841.054, if the last

date that the company writes a policy described by Subsection (a)

is during 2001.

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

2003.

Sec. 841.302. LIMITS ON LIFE OR ACCIDENTAL DEATH INSURANCE. (a)

Until the amount of the capital and surplus of a domestic

insurance company is at least $100,000, the company may not

insure any one life for more than $20,000 in the event of death

from natural causes or more than $40,000 in the event of death

from accidental causes.

(b) If the net capital and surplus of a domestic insurance

company is at least $75,001 but less than $100,000, the company,

for any policy issued by the company, shall reinsure the amount

of the benefit that exceeds $4,000 in the event of death from

natural causes and the amount of the benefit that exceeds $8,000

in the event of death from accidental causes.

(c) If the net capital and surplus of a domestic insurance

company is at least $50,001 but less than $75,001, the company,

for any policy issued by the company, shall reinsure the amount

of the benefit that exceeds $3,000 in the event of death from

natural causes and the amount of the benefit that exceeds $6,000

in the event of death from accidental causes.

(d) If the net capital and surplus of a domestic insurance

company is at least $35,001 but less than $50,001, the company,

for any policy issued by the company, shall reinsure the amount

of the benefit that exceeds $2,000 in the event of death from

natural causes and the amount of the benefit that exceeds $4,000

in the event of death from accidental causes.

(e) If the net capital and surplus of a domestic insurance

company is $35,000 or less, the company, for any policy issued by

the company, shall reinsure the amount of the benefit that

exceeds $1,000 in the event of death from natural causes and the

amount of the benefit that exceeds $2,000 in the event of death

from accidental causes.

(f) Benefits under this section must be reinsured with a legal

reserve company that is authorized to engage in the business of

insurance in this state.

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

2003.

Sec. 841.303. ENTIRE CONTRACT. Each policy of insurance issued

or delivered in this state by any life insurance company engaged

in business in this state constitutes the entire contract between

the parties, except that if the application is made a part of the

contract, the policy and the application constitute the entire

contract.

Redesignated from Insurance Code Sec. 1101.003(a) and amended by

Acts 2003, 78th Leg., ch. 1276, Sec. 10A.204(a), eff. Sept. 1,

2003.

SUBCHAPTER H. DEPOSIT OF SECURITIES

Sec. 841.351. DEPOSIT WITH COMPTROLLER. (a) A domestic

insurance company may, at its option, deposit with the

comptroller either:

(1) securities in which the company's capital stock is invested;

or

(2) securities in an amount equal to the amount of the company's

capital stock.

(b) Securities deposited under Subsection (a) must be securities

of a class authorized by the laws of this state for investments

of a domestic insurance company's capital stock.

(c) A domestic insurance company may, at its option, withdraw a

deposit made under Subsection (a), or any portion of the deposit,

after substituting a deposit of securities of a like class and of

an amount and value equal to the withdrawn deposit or portion of

deposit.

(d) The commissioner must first approve any securities deposited

or being substituted under this section.

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

2003.

Sec. 841.352. ISSUANCE OF RECEIPT FOR DEPOSIT. When a domestic

insurance company deposits securities under this subchapter, the

comptroller shall issue to the company a receipt that:

(1) describes the deposit in a manner that identifies the

securities; and

(2) states that the securities are held on deposit as capital

stock investments of the company.

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

2003.

Sec. 841.353. ADVERTISEMENT OF DEPOSIT. A domestic insurance

company that makes a deposit under this subchapter may:

(1) advertise the fact that a deposit has been made; or

(2) print a copy of the receipt for the deposit on any policy

the company issues.

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

2003.

Sec. 841.354. ACCESS TO DEPOSIT. In accordance with reasonable

rules adopted by the comptroller and the commissioner, the proper

officer or agent of a domestic insurance company making a deposit

of securities under this subchapter may at a reasonable time:

(1) examine the deposit;

(2) detach coupons from the securities; and

(3) collect interest on the deposit.

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

2003.

Sec. 841.355. WITHDRAWAL OF DEPOSIT AFTER MERGER, CONSOLIDATION,

OR TOTAL REINSURANCE. (a) When two or more domestic insurance

companies that have two or more deposits of securities under this

subchapter merge, consolidate, or enter into a total reinsurance

contract by which the ceding company is dissolved and its assets

and liabilities are acquired or assumed by the surviving company,

the new, surviving, or reinsuring insurance company, on approval

of the commissioner, may withdraw all of the deposits, except for

the deposit of the greatest amount and value. The new, surviving,

or reinsuring insurance company must demonstrate to the

commissioner that the company is the owner of the deposited

securities before the commissioner approves the withdrawal of

those securities.

(b) In accordance with an order of the commissioner approving a

withdrawal of securities under this section, the comptroller

shall release, transfer, and deliver the withdrawn securities to

their owner.

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

2003.

Sec. 841.356. SITUS OF DEPOSIT FOR TAX PURPOSES. For purposes

of state, county, or municipal taxation, the situs of deposited

securities is the municipality and county in which the depositing

company's home office is located.

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

2003.

Sec. 841.357. MAINTENANCE OF DEPOSIT. A domestic insurance

company must maintain a deposit of securities under this

subchapter as long as the company has outstanding any liability

to a policyholder in this state.

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

2003.

SUBCHAPTER O. ENFORCEMENT AND INTERVENTION

Sec. 841.701. REVOCATION OF CERTIFICATE OF AUTHORITY. (a) If

the commissioner determines that an insurance company that holds

a certificate of authority does not comply with this chapter or

another law described by Section 841.002, the commissioner shall

notify the company that the commissioner intends to revoke its

certificate of authority on the expiration of the 30-day period

after the date actual notice is delivered or mailed under this

section.

(b) Notice under this section must:

(1) be in writing; and

(2) be delivered to an executive officer of the company by

personal service or by registered mail.

(c) If an insurance company receiving notice under this section

does not fully comply before the expiration of the period

prescribed by Subsection (a), the commissioner shall revoke the

company's certificate of authority.

(d) An insurance company whose certificate of authority is

revoked under this section is not entitled to receive another

certificate of authority for a period of one year and until the

company has fully and in good faith complied with this chapter.

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

2003.

Sec. 841.702. APPEAL OF DETERMINATION TO REVOKE CERTIFICATE. An

insurance company aggrieved by an order of the commissioner to

revoke the company's certificate of authority under Section

841.701 may file suit in a court in Travis County to vacate the

order.

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

2003.

Amended by:

Acts 2005, 79th Leg., Ch.

728, Sec. 11.022, eff. September 1, 2005.

Sec. 841.703. CERTIFICATE OF AUTHORITY VOID ON FAILURE TO

SATISFY JUDGMENT. (a) If an officer holding an execution issued

on a final judgment rendered against an insurance company demands

payment of the judgment from an officer or attorney of record of

the company and the company does not fully satisfy the judgment

before the 31st day after the date the demand is made, the

officer shall certify the demand and failure to the commissioner,

regardless of whether the demand is made in this state.

(b) On receipt of a certification under Subsection (a), the

commissioner shall declare void the certificate of authority

issued to the company under this chapter.

(c) An insurance company whose certificate of authority is

declared void under this section may not engage in the business

of insurance in this state until:

(1) the judgment is fully satisfied and discharged; and

(2) the commissioner renews the company's certificate of

authority.

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

2003.

Sec. 841.704. FALSE STATEMENT, REPORT, OR OTHER DOCUMENT;

CRIMINAL PENALTY. (a) A person commits an offense if the person

executes or causes to be executed a statement, report, or other

document required by law to be filed with the commissioner that

contains a material statement or fact that the person knows to be

false.

(b) A person commits an offense if the person is an officer of

an insurance company that is not organized under the laws of this

state and the person files a statement, report, or other document

required by law to be filed with the commissioner that contains a

material statement or fact that the person knows to be false.

(c) An offense under this section is punishable by imprisonment

in the Texas Department of Criminal Justice for a term of not

less than one year.

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. 25.120, eff. September 1, 2009.

Sec. 841.705. PENALTY FOR FAILURE TO INVEST OR REPORT. (a) In

addition to the penalty provided by this subchapter, an insurance

company is subject to a penalty as prescribed by Subsection (b)

if, while holding a certificate of authority to engage in the

business of insurance in this state, or after the company ceases

to write new business or ceases to hold a certificate of

authority, the company intentionally fails or refuses to:

(1) make the investments required by Chapter 425;

(2) make a report required by a law described by Section

841.002;

(3) make any special report requested by the commissioner under

a law described by Section 841.002; or

(4) comply with another provision of a law described by Section

841.002.

(b) A penalty under this s