SECTION 7.84. Examination Frequency

(a) Purpose. This section governs the frequency of examinations conducted under Insurance Code §401.052. The section implements Insurance Code §401.052(b), which directs the Commissioner to adopt rules governing the frequency of examinations of carriers that have been organized or incorporated for less than five years.

(b) Applicability. This section applies only to examinations commenced after the effective date of this section.

(c) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise.

(1) Carrier--For the purposes of this section, carrier includes any entity subject to examination under Insurance Code §401.051. The term does not include a workers' compensation self-insurance group as that term is defined by Labor Code Chapter 407A.

(2) Commissioner--The Commissioner of Insurance.

(3) Department--The Texas Department of Insurance.

(4) Insurance holding company system--As described in Insurance Code §823.006.

(5) Redomesticated carrier--A carrier that redomesticates to this state from another state under Insurance Code §983.051.

(6) Self-insurance group--An unincorporated association or business trust composed of five or more private employers holding a certificate of approval to act as a workers' compensation self-insurance group issued by the department under the Labor Code Chapter 407A.

(d) Examination of Texas domestic carriers organized or incorporated for five years or more under the laws of this state. Except as provided in subsections (f) and (g) of this section, Insurance Code §401.052(a) governs the frequency of examinations for Texas domestic carriers organized or incorporated for five years or more under the laws of this state.

(e) Examination of Texas domestic carriers incorporated or organized for less than five years under the laws of this state.

(1) Except as provided in paragraph (2) of this subsection and subsections (f), (g), and (h) of this section, the department will conduct an examination of a Texas domestic carrier incorporated or organized for less than five years under the laws of this state in the carrier's first, third, and fifth years. For a Texas domestic carrier that receives a certificate of authority or other authorization from the department on or before June 30, the first year to be examined will be the calendar year in which the carrier received the certificate of authority or other authorization from the department. For a Texas domestic carrier that receives a certificate of authority or other authorization from the department after June 30, the first year to be examined will be the calendar year immediately following the calendar year in which the carrier received the certificate of authority or other authorization from the department and will include the first partial year. After the fifth year, Insurance Code §401.052(a) will govern the frequency of examination.

(2) If a Texas domestic carrier incorporated or organized for less than five years under the laws of this state is a member of an insurance holding company system with one or more affiliated Texas domestic carriers, the department may conduct an examination of the Texas domestic carrier at the same time it conducts the examination of the affiliated Texas domestic carrier or carriers, provided one or more of the Texas domestic affiliated carriers has conducted the business of insurance in Texas continuously for 10 or more consecutive calendar years. In making this determination, the department will consider whether:

(A) any affiliated carriers of the Texas domestic carrier are in a hazardous condition or conditions, including the conditions described in §8.3 of this title;

(B) any affiliated carriers of the Texas domestic carrier are the subject of pending administrative action by a regulatory agency of this state, the United States, or another state; and

(C) the department has any financial or other regulatory concerns regarding any affiliated carriers of the Texas domestic carrier.

(f) Examination of redomesticated carriers. The department will conduct an examination of a redomesticated carrier no later than five years from the carrier's last examination by a prior state of domicile or three years from the date the carrier redomesticates to Texas, whichever is less. The department will conduct an examination of a redomesticated carrier as often as the department considers necessary.

(g) Examination of self-insurance groups. This section does not apply to self-insurance groups governed by Labor Code §407A.252.

(h) Examination of captive insurance companies. This section does not apply to captive insurance companies governed by Insurance Code Chapter 964, unless the department determines an examination of a captive insurance company is necessary.

(i) Commissioner's authority. This section does not in any way limit the Commissioner's authority to visit or examine a carrier as often as the Commissioner considers necessary.

(j) Conflicts. In the event of a conflict between this section and the Insurance Code or the Labor Code, the provisions of the Insurance Code or the Labor Code prevail.

Source Note: The provisions of this §7.84 adopted to be effective August 31, 2010, 35 TexReg 7832; amended to be effective February 7, 2019, 44 TexReg 480