SECTION 13.568. Standards for Fidelity Coverage

(a) Fidelity bond or crime policy. A fidelity bond or crime policy required by any section of this rule must be for an amount of at least $500,000. The commissioner will consider information of all interested parties and determine any amount required in excess of $500,000. The bond or policy must:

(1) obligate the surety to pay any loss of money or other property the plan or trust sustains because of an act of fraud or dishonesty by a person covered by the bond or policy, acting alone or in concert with others; and

(2) be issued by an unaffiliated insurer that holds a certificate of authority in this state, and that is a corporate surety company that is an acceptable surety on Federal bonds under authority granted by the Secretary of the Treasury under 31 U.S. Code Chapter 93. If the commissioner determines, after reviewing information from the approved PEO or the plan and trust's board of trustees, that a fidelity bond or a zero-deductible crime policy is not available from a qualified unaffiliated insurer that holds a certificate of authority in this state, the approved PEO or board of trustees may obtain a fidelity bond or a zero-deductible crime policy from a surplus lines agent in this state in compliance with Insurance Code Chapter 981, concerning Surplus Lines Insurance, or from a corporate surety company which is an acceptable surety on Federal bonds under authority granted by the Secretary of the Treasury under 31 U.S. Code Chapter 93.

(b) Cash deposit. Instead of a fidelity bond or zero-deductible crime policy, the approved PEO or board of trustees may place on deposit with a qualified financial institution securities meeting the requirements of §13.564 of this title (relating to Annual Recalculation; Changes to Deposit) for the benefit of the commissioner. The deposit must be maintained in the amount and is subject to the same conditions required for fidelity coverage under this section. The deposit must be held for TDI's control and may not be withdrawn or substituted without the commissioner's approval.

Source Note: The provisions of this §13.568 adopted to be effective May 17, 2016, 41 TexReg 3479