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Section VI. Title Insurance Basic Manual - Administrative Rules S.2 through S.7

Title Manual Main Index | Section VI Index

Includes Administrative Rules S.2 Effective 01/03/2014 | S.3 Effective 01/03/2014 |
S.4 Effective 01/03/2014 | S.5 Effective 01/03/2014 | S.6 Effective 01/03/2014 |
S.7 Effective 01/03/2014

S.2. Solvency Account for Capitalization Standards


Pursuant to §2651.012, Insurance Code, a title agent may hold unencumbered assets in a solvency account which may be established by an initial deposit in an amount less than the amount provided by §2651.012(c) and Administrative Rule S.1.

  1. A solvency account must be:

    1. maintained in a financial institution in this state that is insured by an agency of the United States

    2. accessible only to the Department of Insurance, on order of the Commissioner of Insurance; and

    3. audited in the same manner provided for trust funds by §2651.151, Insurance Code.

  2. The solvency account is established after the title agent and the financial institution enter into a Tripartite Agreement (Form T-S2) with the commissioner. The title agent shall submit to the Department three original Tripartite Agreement forms executed by both the title agent and the financial institution. After the commissioner executes the Tripartite Agreement forms, one signed original will be returned to the title agent and one signed original will be sent to the financial institution.

  3. The solvency account must be funded with a minimum deposit in the amount for each policy of title insurance issued by the agent that is equal to the greater of $5 or one percent of the title agent's portion of the Basic Premium for the policy of title insurance retained by that title agent, after remittance of the title insurance company's portion, rounded to the nearest whole dollar. The Basic Premium does not include premiums for endorsements or amendments to the policy of title insurance.

  4. Deposits to the solvency account must be made quarterly and must be made from and based on policies of title insurance with a date of policy occurring during that calendar quarter. The deposits shall be made pursuant to the following schedule:

    Calendar Quarter Ending Deposit Installment Due Date

    March 31 May 1

    June 30 August 1

    September 30 November 1

    December 31 February 1

  5. Interest that accrues in a solvency account, the principal balance of which is less than the amount provided by §2651.012(c), Insurance Code, must be retained in the account. Interest that accrues in a solvency account the principal balance of which is greater than the amount provided by §2651.012(c), Insurance Code, may be paid to the title agent maintaining the account.

  6. The commissioner may issue an order to access or release funds held in an account under this rule if any of the events described by §2651.012(b) occur. Execution of the Tripartite Agreement by the commissioner constitutes an order to authorize the release of funds in the solvency account as provided in the Tripartite Agreement.

  7. An account established, funded, and maintained as provided by this rule complies with the requirement for maintenance of unencumbered assets under §2651.012(c), Insurance Code, and Administrative Rule S.1 regardless of whether the amount required by that rule is fully accrued.

  8. In a home office issue transaction in which a title insurance company issues a policy of title insurance, a title agent who closes the transaction and remits premium to the title insurance company shall make the deposit required by this rule. If a title agent does not close the home office issue transaction or does not remit premium to the title insurance company, no deposit is required to be made by that title agent for that transaction.

    Effective January 3, 2014 (Order 2806)


Title Manual Main Index | Section VI Index

S.3. Title agent requirements, procedures, and forms for obtaining release of assets in accordance with Insurance Code §2651.012(b) or §2651.0121.

  1. In this rule, "title agent" and "agent" have the same meaning as "title insurance agent" in Procedural Rule P-1h.

  2. A title agent may request that the Commissioner authorize release of unencumbered assets by filing a written request for release of the assets with the Department. The request may be made when:

    1. The title agent has voluntarily ceased to engage in business and has surrendered the agent's license. The title agent must have completed the following actions:

      a) Conducted a final audit of the agent's trust fund accounts, the records pertaining thereto and the unused forms in agent's/direct operation's possession, in accordance with §§2651.151-157 and 2651.251-253, Insurance Code.

      b) Surrendered all pending files and outstanding commitments to the appropriate Companies.

      c) Sent written notice to all interested parties in pending transactions that the appropriate Companies have custody and control of such files.

      d) Transferred all escrow accounts and investment accounts, which have not been fully disbursed, to the appropriate Companies for the benefit of the parties to pending transactions and the general public.

    2. The title agent is being liquidated and has completed the actions set forth in Section 1 (a)-(d) above.

    3. The title agent has merged or consolidated or effected the equivalent of a merger or consolidation with another title agent which maintains the amount of unencumbered assets that would be required for the survivor title agent.

  3. In accordance with §2651.0121(j), Insurance Code, the Commissioner shall issue an order authorizing the financial institution in which a solvency account is held to release all or part of the account balance to the agent or the agent's principal office within 60 days of the receipt of a Solvency Account Release Request (Form T-S3). Title agent shall submit two executed originals of the Solvency Account Release Request (T-S3) to the Department. The Department shall acknowledge receipt of the request and return one copy of the acknowledged request to the title agent. If the Commissioner does not enter the order within the prescribed period, the application is denied and the title agent may seek immediate equitable relief from a court of competent jurisdiction.

  4. Funds held in a solvency account under a Tripartite Agreement (Form T-S2) may be transferred or released in accordance with the terms of the Tripartite Agreement.

    Effective January 3, 2014 (Order 2806)


Title Manual Main Index | Section VI Index

S.4. TITLE COMPANY REQUIREMENTS, PROCEDURES, AND FORMS FOR PROVIDING PRIVILEGED TITLE AGENT FINANCIAL SOLVENCY INFORMATION TO THE DEPARTMENT PURSUANT TO §2651.011

A title insurance company may provide information to the Department about a financial matter that would reasonably call into question the solvency of a title agent that the title insurance company appointed. The following requirements apply to a title insurance company that is providing information to the commissioner:

  1. Pursuant to Insurance Code §2651.011(b), each title insurance company shall provide annually to the Department a list of officers authorized to provide to the Department the information specified under this administrative rule. The list of authorized officers must be submitted on Form T-S4.

    1. The initial Form T-S4 must be submitted to the Department within 30 days of the effective date of this rule and the subsequent Form T-S4 must be submitted annually between January 1 and January 31 of each year for the calendar year beginning in 2014.

    2. Form T-S4 may be obtained from the Texas Department of Insurance, Title Examinations, P.O. Box 149104, Austin, Texas 78714-9104 or 333 Guadalupe, Austin, Texas 78701, or from the Department's website www.tdi.texas.gov.

    3. Form T-S4 should be submitted to the Texas Department of Insurance, Title Examinations, P.O. Box 149104, Austin, Texas 78714-9104 or 333 Guadalupe, Austin, Texas 78701.

  2. All information provided under this administrative rule shall be submitted on the Financial Matter Disclosure Report (Form Number T-S4-A) and is subject to the disclosure requirements in §2651.011(b).

    1. Form Number T-S4-A may be obtained from the Texas Department of Insurance, Title Examinations, P.O. Box 149104, Austin, Texas 78714-9104 or 333 Guadalupe, Austin, Texas 78701, or from the Department's website www.tdi.texas.gov.

    2. Form Number T-S4-A should be submitted to the Texas Department of Insurance, Title Examinations, P.O. Box 149104, Austin, Texas 78714-9104 or 333 Guadalupe, Austin, Texas 78701.

    Effective January 3, 2014 (Order 2806)

Title Manual Main Index | Section VI Index

S.5. FILING OF TITLE AGENT'S QUARTERLY WITHHOLDING TAX REPORT

  1. In accordance with §2651.011(c) of the Insurance Code, all title insurance agents shall submit to the Department on a quarterly basis a copy of the agent's quarterly withholding tax report or its equivalent that the title agent filed with the United States Internal Revenue Service (IRS) and evidence that the taxes have been paid. The agent may redact the salaries of individual employees from the quarterly withholding tax report or its equivalent.

  2. The copy of the agent's quarterly withholding tax report or its equivalent and evidence that the taxes have been paid (such as a cancelled check or a debit on a bank statement that clearly indicates that funds were paid to the United States Treasury for taxes) must be submitted to the Department no later than 45 days after the end of the quarter. The schedule for filing is as follows:

    Quarter Ending TDI Due Date

    March 31 May 15

    June 30 August 15

    September 30 November 15

    December 31 February 15

  3. The agent's quarterly withholding tax report or its equivalent and evidence that the taxes have been paid should be submitted to the Texas Department of Insurance, Title Examinations, P.O. Box 149104, Austin, Texas 78714-9104 or 333 Guadalupe, Austin, Texas 78701 or may be submitted electronically to the Department.

  4. Form T-S5 may be obtained from the Texas Department of Insurance, Title Examinations, P.O. Box 149104, Austin, Texas 78714-9104 or 333 Guadalupe, Austin, Texas 78701, or from the Department's website www.tdi.texas.gov.

  5. A title agent that does not have employees shall certify to the Department that there has not been a material change in the agent's financial condition in accordance with the schedule specified in subsection II of this administrative rule to the address specified in subsection III of this administrative rule using Form T-S5.

  6. If an agent is part of a professional employer organization, it may submit a copy of the report of payroll tax the agent receives from the professional employer organization as the equivalent of a quarterly withholding tax report.

    Effective January 3, 2014 (Order 2806)


Title Manual Main Index | Section VI Index

S.6. REQUIREMENTS FOR TITLE AGENT EXAMINATION REPORTS PURSUANT TO §2651.206

  1. A report of an audit, review, or examination of a title agent or direct operation conducted under Chapter 2602 or 2651 of the Insurance Code shall be subject to all of the following procedures and requirements:

    1. Before the report from an examination, review, or audit becomes final, the Department shall furnish to the title agent or direct operation a copy of the draft report and any evidence on which the report relies.

    2. A title agent or direct operation that wishes to respond to the draft report must respond within 14 days of receiving the draft report and evidence on which the report relies from the Department. The Department may extend this period if it is reasonable to do so. The Department will review the response before issuing the final exam report.

    3. A title agent or direct operation that wishes to appeal the final exam report must follow the procedure contained in §7.83 of Title 28 of the Texas Administrative Code for appealing financial examination reports.

    4. The report and any evidence regarding the report are confidential and not subject to disclosure under the Insurance Code or Chapter 552 of the Government Code, and may be transmitted only to designated representatives of the title agent or direct operation previously specified in writing by the title agent.

  2. If the Department requests a meeting with a title agent or direct operation regarding a report, the commissioner shall furnish the title agent or direct operation with a copy of the draft or final report, as applicable, and a copy of any evidence on which the report relies not later than the 10th day before the scheduled date of a meeting, if when it requests the meeting, the Department has not provided the title agent or direct operation a copy of the report and evidence.

  3. Section 2651.206 does not require the Department to turn over work papers. Work papers as specified in §2651.206(c) of the Insurance Code include work programs, analyses, memoranda, letters of confirmation and representation, abstracts of company documents and schedules, and commentaries prepared or obtained by the auditor or examiner that support the opinions of the auditor or examiner.

    Effective January 3, 2014 (Order 2806)


Title Manual Main Index | Section VI Index

S.7. SURETY BOND FOR TITLE AGENTS TO COMPLY WITH MINIMUM CAPITALIZATION STANDARDS

  1. Procedures for Use of the Surety Bond.

    1. Filing
      A title insurance agent may file a surety bond with the Department to comply with the minimum capitalization requirements set forth in Insurance Code §2651.012(c)(1) - (4).

    2. Conditions of Bond
      The bond shall be:

      (1) in the amount that a title insurance agent requests to comply with the minimum capitalization requirements set forth in Insurance Code §2651.012(c)(1) - (4);

      (2) executed by a surety company authorized to do business in the State of Texas; and

      (3) payable to the Commissioner of Insurance.

    3. Bond Proceeds

      (1) The commissioner makes a claim under the bond solely on behalf of: (i) a supervisor or conservator appointed by the commissioner; (ii) a court-appointed receiver, rehabilitator or liquidator; or (iii) the Texas Title Insurance Guaranty Association.

      (2) Bond proceeds:

      (a) shall be used, as permitted by the commissioner, by the supervisor, conservator, receiver, rehabilitator, liquidator, or the Texas Title Insurance Guaranty Association for contingencies, including the payment of administrative expenses, incurred or that may be incurred by or on behalf of a title agent that has been declared impaired, either before or after the date of impairment; and

      (b) shall not be considered funds of the state.

    4. Expiration or cancellation of bond.
      The bond shall not expire or be subject to cancellation until the 30th day after written notice of expiration or cancellation has been served on the Department either personally or by certified mail. Unless the title agent provides the Department with evidence of compliance with Insurance Code §2651.012(c)(1) - (4) on or before the expiration of the 30 day period, the title agent shall not perform the acts of a title insurance agent after notice of cancellation is issued.

    5. If an agent elects to utilize a surety bond as the method of complying with the title agent's capitalization requirement, then the agent must at the time of license renewal provide written notice to the Texas Department of Insurance, Title Examinations, P.O. Box 149104, Austin, Texas 78714-9104 or 333 Guadalupe, Austin, Texas 78701 that such surety bond has been purchased and that such surety bond meets the title agent's statutory capitalization requirements.

  2. Form and Content of Bond. The Texas Department of Insurance prescribes the form and content of the surety bond in Section V Exhibits and Forms of the Basic Manual.

    Effective January 3, 2014 (Order 2806)
    Texas Title Insurance Agent's Minimum Capitalization Bond

Title Manual Main Index | Section VI Index



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Last updated: 11/23/2015

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