28 TAC §7.9
1. INTRODUCTION. The Texas Department of Insurance proposes new §7.9 concerning the examination of the actuarial opinion of an insurer which is required to file an actuarial opinion with its property and casualty annual statement adopted by the commissioner. The proposed section will require a domestic property and casualty insurer to submit to the department an Actuarial Opinion Summary which will facilitate the examination of the actuarial opinion submitted in accordance with Insurance Code §802.002 which requires an actuarial opinion to be submitted with an insurer's annual statement. In addition, the proposed section will provide that the commissioner may request a domestic property and casualty insurer to furnish its Actuarial Report and Workpapers and a foreign insurer to furnish its Actuarial Opinion Summary and Actuarial Report and Workpapers. The proposed section will further provide that the Actuarial Opinion Summary and the Actuarial Report and Workpapers be completed in accordance with the National Association of Insurance Commissioners' Annual Statement Instructions, Property and Casualty ( Instructions ) which are adopted annually by the department in conjunction with its adoption of the annual statement forms.
2. FISCAL NOTE . Ms. Betty Patterson, Senior Associate Commissioner, Financial Program, has determined that for each year of the first five years the proposed section will be in effect, there will be no fiscal impact to state and local governments as a result of the enforcement or administration of the rule. There will be no measurable effect on local employment or the local economy as a result of the proposal.
3. PUBLIC BENEFIT/COST NOTE. Ms. Patterson has also determined that for each year of the first five years the section is in effect, the public benefits anticipated as a result of the section will be improved identification of insurers in hazardous financial condition. The proposed section will require an Actuarial Opinion Summary to be submitted to the department annually on or before March 15th. It is a summary of the Actuarial Report and Workpapers and will provide information on the opining actuary's point estimate and/or range of reasonable estimates, explanation of any exceptional adverse development, and other information required by the Instructions . The Actuarial Opinion Summary will assist the department in identifying insurers requiring further analysis to determine their financial condition. Conversely, it will help the department determine which insurers do not need further examination. Based on the department's experience, the probable economic cost to persons required to comply with the proposed section will be less than $1,000. The section requires the appointed actuary to prepare the Actuarial Opinion Summary in accordance with the Instructions. The department estimates that this will take the appointed actuary no more than four hours. Consulting actuary rates range from $200 to $300 per hour and represent the high end of the cost per hour, so the cost of compliance should not exceed $1,000. On the basis of cost per hour of labor, there is no expected difference in cost of compliance between micro, small and larger businesses affected by this section. The department finds it neither legal nor feasible to waive or reduce the effect of the proposed section on micro or small insurers subject to the section since the information required by the section is necessary to effectively regulate and monitor the financial condition of property and casualt y insurers licensed in Texas , regardless of their size.
4. REQUEST FOR PUBLIC COMMENT. To be considered, written comments on the proposal must be submitted no later than 5:00 p.m. on November 28, 2005 to Gene C. Jarmon, 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 must be simultaneously submitted to Betty Patterson, Senior Associate Commissioner, Financial Program, Mail Code 305-2A, Texas Department of Insurance, P.O. Box 149104 , Austin , Texas 78714-9104 . A request for a public hearing should be submitted separately to the Office of the Chief Clerk.
5. STATUTORY AUTHORITY. The new section is proposed under the Insurance Code Article 1.15, which authorizes the commissioner to examine each insurer doing business in this state; Article 1.32, which authorizes the commissioner to establish criteria for hazardous conditions; Article 21.39, which requires insurers to establish adequate reserves and provides for the adoption of each current formula for establishing reserves applicable to each line of insurance; §802.001 which authorizes the commissioner to make changes in the forms of the annual statements required of insurance companies of any kind, as shall seem best adapted to elicit a true exhibit of their condition and methods of transacting business; §802.002, which requires an insurance company's annual statement to include an actuarial opinion relating to the loss and loss adjustment expense reserves for property and casualty risks; Article 21.54, §§861.254, 862.001, 883.203, 883.204, 885.401, 911.002, 911.304, 912.301, 941.252, 942.201, 982.004, 984.153, and 984.202, which require insurers subject to the proposed section to file an annual statement, other financial reports and other information and specify particular rulemaking authority of the commissioner relating to those insurers; and §36.001, which provides that the commissioner may adopt any rules necessary and appropriate to implement the powers and duties of the Texas Department of Insurance under the Insurance Code and other laws of this state.
6. CROSS REFERENCE TO STATUTE. The following statutes are affected by this proposal: Insurance Code Articles 1.15 and 1.32, and §802.002.
§7.9. Examination of Actuarial Opinion for Property and Casualty Insurers.
(a) Scope. This section applies to all insurers that are required to file an actuarial opinion with the property and casualty annual statement adopted by the commissioner under Insurance Code §802.001, including fire, fire and marine, general casualty, fire and casualty, or U.S. branch of an alien insurer, county mutual insurance company, mutual insurance company other than a life insurance company, Lloyd's plan, reciprocal or inter-insurance exchange, domestic risk retention group, life insurance company that is licensed to write workers' compensation, any farm mutual insurance company that filed a property and casualty annual statement that had gross written premiums in excess of $5,000,000, any Mexican non-life insurer licensed under any provision of the Insurance Code other than, or in addition to, Insurance Code Chapter 984, domestic joint underwriting association, the Texas Mutual Insurance Company, and the Texas FAIR Plan Association.
(b) Purpose. The section will facilitate the examination of the statement of actuarial opinion required to be attached to an insurer's annual statement under Insurance Code §802.002. The Actuarial Opinion Summary will provide information which will assist the department in identifying those insurers which require additional analysis to determine their financial condition.
(c) Actuarial Opinion Summary. By March 15th of each year a domestic insurer subject to this section shall submit to the department an Actuarial Opinion Summary completed in accordance with applicable National Association of Insurance Commissioners Annual Statement Instructions, Property and Casualty .
(d) Additional Documents. Upon request of the commissioner:
(1) a domestic insurer shall submit the Actuarial Report and Workpapers that support its actuarial opinion, and
(2) a foreign insurer shall submit its Actuarial Opinion Summary and / or Actuarial Report and Workpapers that support its actuarial opinion.
(e) Submission of Documents. The documents described in subsections (c) and (d) of this section shall be submitted to the Actuarial Division, Financial Program, M.C. 302-3A, Texas Department of Insurance, 333 Guadalupe, P.O. Box 149104, Austin, Texas 78714-9104, or they may be submitted electronically to ActuarialDivision@tdi.state.tx.us.
(f) Confidentiality. The Actuarial Opinion Summary, Actuarial Report and Workpapers, and any documents, materials or other information provided by an insurer under subsections (c) or (d) of this section to the department will be used to examine the company's financial condition. The documents will be considered information obtained during the course of an examination under Insurance Code Article 1.15 and treated as confidential.
(g) Applicability. This section is applicable to the actuarial opinion included with an insurer's 2005 Property and Casualty Annual Statement and thereafter.