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Texas Department of Insurance
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Subchapter A. Automobile Insurance

Division 1. Certificates of Assumption

28 TAC §5.11

1. INTRODUCTION. The Texas Department of Insurance proposes an amendment to §5.11, concerning assumption certificates related to automobile insurance policies. The section provides for the issuance of assumption certificates covering automobile policies only after the Texas Department of Insurance has approved a reinsurance assumption agreement that is in the best interests of the policyholders. This proposed amendment deletes the requirement of the ceding carrier being in conservatorship or receivership as the department recognizes the need for approving assumption reinsurance agreements in other limited situations. In general, these limited situations are tied to the best interests of the affected policyholders when a transaction such as a related dissolution, sale or hazardous financial condition, or other financial condition of the ceding insurer indicates an assumption of the policies would be in the best interest of the policyholders. Each situation will be determined on a case-by-case review.

2. FISCAL NOTE. Betty Patterson, Senior Associate Commissioner, Financial Program, has determined that for each year of the first five years the proposed amendment is in effect, there will be no fiscal implications for state or local government as a result of enforcing and administering the section as proposed. There is no anticipated effect on local employment or local economy.

3. PUBLIC BENEFIT / COST NOTE. Ms. Patterson also has determined that for each year of the first five years the proposed amendment is in effect, the public benefit anticipated as a result of the adoption of the amendment will be the more efficient servicing and handling of policyholders where the ceding insurer is dissolving, being sold, or in hazardous financial condition. In addition, the security of the policyholder is a primary factor in the consideration of any request to approve an assumption reinsurance transaction. Ms. Patterson has also determined that, for each year of the first five years that this proposed section is in effect, there will be no anticipated economic cost to persons required to comply with the proposed section and thus will have no adverse impact to small or micro business.

4. REQUEST FOR PUBLIC COMMENT. To be considered, written comments on the proposal must be submitted no later than 5:00 P.M. on July 15, 2002, to Lynda H. Nesenholtz, General Counsel and Chief Clerk, Mail Code 113-2A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104. An additional copy of the comments should be submitted simultaneously to Jimmy Atkins, Staff Attorney, Mail Code 110-1A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104. A request for a public hearing on the proposal should be submitted separately to the Office of the Chief Clerk.

5. STATUTORY AUTHORITY. The amendment is proposed under the Insurance Code Articles 5.06 and 5.10 and §36.001. Articles 5.06 and 5.10 authorize the commissioner to adopt rules as necessary to carry out the provisions of the Insurance Code, Chapter 5, regarding automobile insurance. Section 36.001 provides the commissioner of insurance with the authority to adopt rules for the conduct and execution of the powers and duties of the department as authorized by statute.

6. CROSS-REFERENCE TO STATUTE. Insurance Code Article 5.06 is affected by this section.

7. TEXT.

§5.11. Certificates of Assumption.

A certificate of assumption may be attached only to an automobile insurance [ a] policy issued for an insurer [ a company in receivership or conservatorship] for which a reinsurance assumption agreement has been approved by a [ court order,] commissioner´s order pursuant to 28 Texas Administrative Code §7.604 [ , or board order applies]. For utilization under this section, the Texas Department of Insurance [ State Board of Insurance] adopts by reference a certificate of assumption form which is published by the Texas Department of Insurance [ State Board of Insurance] and available from the Automobile [ and Miscellaneous Lines] Division , P.O. Box 149104, Mail Code 104-1A, Austin, Texas 78714-9104. [ of the State Board of Insurance, 1110 San Jacinto Boulevard, Austin, Texas 78701-1998.]

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