Relating to a property and casualty self-insurance pool for certain religious institutions; authorizing fees; providing administrative penalties.

89(R) HB 3320 - Senate Committee Report version - Bill Text

By: Oliverson, et al. (Senate Sponsor - Parker)

H.B. No. 3320

(In the Senate - Received from the House May 19, 2025;

May 19, 2025, read first time and referred to Committee on Business &

Commerce; May 26, 2025, reported favorably by the following vote:

Yeas 10, Nays 1; May 26, 2025, sent to printer.)
Click here to see the committee vote

A BILL TO BE ENTITLED

AN ACT

relating to a property and casualty self-insurance pool for certain

religious institutions; authorizing fees; providing administrative

penalties.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subtitle G, Title 10, Insurance Code, is amended

by adding Chapter 2214 to read as follows:

CHAPTER 2214. RELIGIOUS INSTITUTIONS SELF-INSURANCE POOL

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 2214.001. DEFINITIONS. In this chapter:

(1) "Board" means the board of trustees of the pool.

(2)

"Church" means a nonprofit religious organization

consisting of a group of religious believers.

(3)

"Fund" means a trust fund established under

Section 2214.052.

(4)

"Member" means a church, nonprofit religious

organization, or religious denomination entitled to pool coverage

and obligated for pool liabilities under a pool coverage agreement.

(5)

"Nonprofit religious organization" means an

active corporation or other entity organized under Section

501(c)(3), Internal Revenue Code of 1986, as a nonprofit

organization defined as any one of the following:

(A) a church or religious house of worship;

(B)

an organization formed for religious

purposes;

(C)

a nonprofit institution affiliated with a

faith-based organization; or

(D)

an integrated auxiliary organization of a

church.

(6)

"Organizing party" means a church, nonprofit

religious organization, or religious denomination that has entered

into a pool creation agreement.

(7)

"Person" means an individual, corporation, trust,

partnership, association, or any other legal entity.

(8)

"Pool" means the Religious Institutions

Self-Insurance Pool authorized under this chapter.

(9)

"Pool coverage" means the self-insured coverage

provided by the pool in accordance with this chapter.

(10)

"Pool coverage agreement" means an indemnity

agreement under which a church, nonprofit religious organization,

or religious denomination is entitled to pool coverage in exchange

for the payment of premiums to the pool and is obligated for pool

liabilities.

(11)

"Pool creation agreement" means an agreement

entered into under Section 2214.051.

(12)

"Religious denomination" means a group of

individual churches or houses of worship that are identified using

the same terms and have a particular set of beliefs or spiritual or

religious values.

Sec.

2214.002.

POOL NOT INSURANCE; APPLICABILITY OF

INSURANCE LAWS. The pool is not an insurer and pool coverage is not

insurance for purposes of this code. Except as provided by this

chapter, the pool is not subject to a provision of this code other

than this chapter.

Sec.

2214.003.

PARTNERSHIP NOT CREATED. Notwithstanding

any other law, the pool is not a partnership under the laws of this

state.

Sec.

2214.004.

POOL NOT COVERED BY GUARANTY ASSOCIATION.

The pool is not a member insurer of the Texas Property and Casualty

Insurance Guaranty Association.

Sec.

2214.005.

RULES. The commissioner may adopt rules

necessary to implement this chapter.

SUBCHAPTER B. CREATION OF POOL

Sec.

2214.051.

POOL CREATION AGREEMENT. (a) The pool may

be created by two or more churches or nonprofit religious

organizations or one or more religious denominations that enter

into an agreement described by Subsection (b).

(b)

An agreement under Subsection (a) must be in the form of

an indemnity agreement signed by each organizing party

acknowledging and agreeing to the assumption of the obligations of

the pool under this chapter.

(c)

Each organizing party that enters into the agreement

must have a positive net worth, be financially solvent, and be

capable of assuming the obligations of the pool.

Sec.

2214.052.

TRUST FUND. The organizing parties shall

establish a trust fund to serve as the group self-insurance account

for the members.

Sec.

2214.053.

SELECTION OF TEMPORARY BOARD. At the time

the organizing parties enter into the pool creation agreement, the

organizing parties shall select nine individuals to:

(1) serve as the temporary board; and

(2) draft a plan of operation for the pool.

Sec.

2214.054.

POWERS OF TEMPORARY BOARD. The temporary

board may:

(1)

solicit applications from prospective members to

participate in the pool on the date the pool begins providing pool

coverage;

(2)

accept payment of premiums for the prospective

pool coverage; and

(3)

take any other action necessary to complete and

submit an application for a certificate of authority under

Subchapter C.

Sec.

2214.055.

DOMICILE. The pool must be domiciled in this

state.

SUBCHAPTER C. CERTIFICATE OF AUTHORITY

Sec.

2214.101.

CERTIFICATE OF AUTHORITY. (a) The pool may

not provide pool coverage before the department issues a

certificate of authority to the pool.

(b)

A certificate of authority issued under this subchapter

is continuous until:

(1) revoked or suspended by the commissioner; or

(2)

the board voluntarily surrenders the certificate

in connection with the pool's dissolution under Section 2214.451.

(c)

The temporary board appointed by the organizing parties

under Section 2214.053 shall submit to the department a written

application, in the form and manner prescribed by the commissioner,

for a certificate of authority.

Sec.

2214.102.

APPLICATION CONTENTS. (a) An application

for a certificate of authority under this chapter must include:

(1) the pool creation agreement;

(2) the plan of operation; and

(3)

evidence of the financial strength and liquidity

of the organizing parties to pay claims promptly and support the

pool's financial ability to satisfy the pool's obligations.

(b)

The evidence described by Subsection (a)(3) must be in

the form of:

(1) either:

(A)

financial statements, dated not later than

one year before the date the temporary board submits the

application and audited by an independent certified public

accountant, showing a combined net worth of the organizing parties

of at least $1 million; or

(B)

financial documents, in the form and manner

prescribed by the commissioner, sufficient to verify the combined

net worth of the organizing parties is at least $1 million;

(2)

current financial documents of each prospective

member that has applied to participate in the pool dated not later

than one year before the date the board submits the application;

(3) schedules of all prospective members showing:

(A)

the ratio of current assets to current

liabilities of all prospective members combined to be greater than

one-to-one;

(B)

the working capital of all prospective

members combined to be an amount establishing the financial

strength and liquidity of the pool to pay claims promptly; and

(C)

the net worth of all prospective members

combined to be at least $1 million; and

(4)

other financial information and documents as

required by the commissioner.

(c)

The following items must be included with the

application:

(1) security as required by Section 2214.351(d);

(2)

copies of excess insurance or reinsurance that

meets the requirements of Section 2214.355 and the commissioner;

(3)

a bond covering each third-party administrator as

required by Section 2214.152;

(4)

a certification from a designated depository

attesting to the amount of money on hand in the trust fund

established under Section 2214.052;

(5)

copies of pool bylaws and any trust agreement or

other governance documents;

(6)

an individual application, in the form and manner

prescribed by the commissioner, of each prospective member applying

to participate in the pool that includes a copy of the prospective

member's executed indemnity agreement;

(7)

evidence of financial strength and liquidity of

the prospective members on the date the application is submitted to

satisfy the financial strength and liquidity requirements of this

chapter;

(8)

proof that the pool will have the minimum annual

earned premium required by Section 2214.351 when the pool begins

operation;

(9)

the current annual report or financial statement

of any casualty insurance company providing excess or reinsurance

coverage for the pool, if the statement is not already on file with

the department;

(10)

the name, address, and telephone number of each

attorney representing the pool, each qualified actuary for the

pool, and each certified public accountant who will be auditing the

annual financial statements of the pool, as well as evidence of the

appointment of each by the board;

(11)

the domicile address in this state where the

pool's books and records are maintained and the state from which the

pool's fund will be administered;

(12)

proof of advance payment into the fund by each

prospective member of not less than 25 percent of the prospective

member's first year estimated annually earned premiums;

(13)

a feasibility study or other analysis prepared by

a qualified actuary using actual loss history of the prospective

members;

(14)

pro forma financial statements projecting the

first three years of operations of the pool based on a feasibility

study or other analysis prepared by a qualified actuary that

include a pro forma balance sheet, income statement, and statement

of cash flow, each of which are prepared in accordance with

generally accepted accounting principles; and

(15)

a copy of the pool's premium billing policy

indicating whether the premium payments to the pool are to be paid

by members annually, monthly, quarterly, or any combination of

those periods.

(d)

The application must be sworn to and subscribed before a

notary public.

Sec.

2214.103.

APPLICATION APPROVAL. (a) The commissioner

shall approve an application for a certificate of authority if the

application and the proposed pool satisfy the requirements of this

subchapter and rules adopted under this chapter.

(b)

The commissioner may deny without review an application

for a certificate of authority under this chapter that does not meet

the requirements of this subchapter.

Sec.

2214.104.

FEES. (a) The commissioner may impose a fee

for an application for a certificate of authority under this

chapter in an amount necessary to cover the department's expenses

in reviewing the application.

(b)

The commissioner may impose other fees in amounts

reasonable and necessary to defray the costs of administering this

chapter.

SUBCHAPTER D. OPERATION OF POOL

Sec.

2214.151.

GOVERNANCE OF POOL; BOARD OF TRUSTEES. (a)

The pool is governed by a board of trustees composed of nine members

selected as provided by the plan of operation.

(b)

Not later than the 15th day after the date the

commissioner approves the temporary board's application for a

certificate of authority, the initial regular board must be

selected as provided by the plan of operation. The members of the

initial regular board shall take office not later than the 30th day

after the date the application for the certificate of authority is

approved.

Sec.

2214.152.

POOL ADMINISTRATION. (a) The board may

administer the pool by employing an administrator or contracting

with a third-party administrator.

(b)

If the board employs an administrator to administer the

pool, the pool must purchase a bond, errors and omissions

insurance, directors' and officers' liability insurance, or another

security approved by the commissioner for the administration of the

pool.

(c)

A third-party administrator contracted by the board and

whose acts are not covered by the pool's bond, errors and omissions

insurance, directors' and officers' liability insurance, or other

security approved by the commissioner and any person contracting

either directly or indirectly with the pool to provide claims

adjusting, underwriting, safety engineering, loss control,

marketing, investment advisory, or administrative services to the

pool or the members, other than bookkeeping, auditing, or claims

investigation services, shall:

(1) submit to the department:

(A)

a safekeeping receipt or trust receipt from a

bank or savings and loan association doing business in this state

indicating the deposit and pledge to secure the performance of the

administrator's or person's obligations under the contract and this

chapter of:

(i) $50,000; or

(ii)

bonds of the United States, this

state, or any political subdivision of this state having a par value

of $50,000; or

(B)

a surety bond issued by a corporate surety

authorized to engage in business in this state of not less than

$50,000; and

(2)

place all contractual terms, including fee

arrangements, in a written agreement that constitutes the entire

agreement between the parties and is signed by the administrator or

person and the pool.

SUBCHAPTER E. POOL COVERAGE

Sec.

2214.201.

COVERAGE AUTHORIZED. (a) The pool's

certificate of authority authorizes the pool to provide coverage to

churches, nonprofit religious organizations, and religious

denominations on a self-insured basis for damage to or loss of a

structure or building.

(b)

In addition to coverage authorized by Subsection (a),

pool coverage may include:

(1) premises liability coverage;

(2) contents coverage for furniture or equipment;

(3) wind and hail coverage;

(3) loss of use coverage; or

(4) medical payments coverage.

(c)

Pool coverage is provided in the form of an indemnity

agreement entered into by the member under which the member is

entitled to pool coverage in exchange for the payment of premiums to

the pool and is obligated for pool liabilities as provided by

Section 2214.202.

Sec.

2214.202.

MEMBER LIABILITY. To the extent required by

this chapter, each member is jointly and severally liable for

liabilities incurred by the pool for each fiscal year in which the

member is entitled to pool coverage.

Sec.

2214.203.

RATES; APPEAL. (a) The board shall set

rates for pool coverage. The rates must be actuarially justified.

(b)

The board shall file proposed rates with the department

and may use the rates beginning on the 90th day after the date of the

filing, unless the commissioner disapproves the use of the rates

within the 90-day period.

(c)

The board shall prescribe a reasonable procedure for any

member aggrieved by the rates to request in writing a review of the

rating system for pool coverage. The board shall grant or deny the

request in writing not later than the 30th day after the date the

board receives the request.

(d)

If the board rejects a request for review under

Subsection (c) or fails to grant or reject the request within the

30-day period described by that subsection, the party requesting

the review may appeal to the commissioner for a hearing not later

than the 30th day after the expiration of the 30-day period. After

the hearing, the commissioner may affirm, modify, or reverse an

action taken by the board with respect to rates.

Sec.

2214.204.

RATE REVIEW. On the request of the

commissioner, the pool shall obtain a rate review conducted by a

national independent actuarial firm, provided that the

commissioner may not make more than two requests in any calendar

year for a rate review under this section. The firm shall report

its findings to the commissioner.

Sec.

2214.205.

UNDERWRITING GUIDELINES; MEMBERSHIP

APPLICATION. (a) The board in the plan of operation shall

prescribe:

(1)

underwriting guidelines and procedures for

evaluating risks; and

(2)

procedures for eligible persons to apply to become

members.

(b)

The board shall provide written notice to an applicant

for pool membership that the pool is not a member insurer covered by

the Texas Property and Casualty Insurance Guaranty Association.

SUBCHAPTER F. SOLICITATION OF POOL MEMBERSHIP

Sec.

2214.251.

USE OF INSURANCE AGENT REQUIRED. Any person

soliciting applications for pool membership must hold a general

property and casualty agent license under Chapter 4051. A pool

employee or employee of a religious denomination or association of

nonprofit religious organizations is not required to hold an

agent's license if the solicitation of applications for pool

membership is not the employee's primary duty.

Sec.

2214.252.

LIABILITY OF AGENT. An insurance agent or

other person involved in the soliciting or processing of

applications for pool membership is not liable for claims arising

out of the insolvency of the pool or the inability of the pool to pay

claims as they become due unless the claimant first exhausts all

remedies available to the claimant against the members as provided

by this chapter.

Sec.

2214.253.

USE OF APPLICATION INFORMATION. (a) Except

as otherwise provided by this section, for purposes of soliciting,

selling, or negotiating the renewal or sale of group self-insurance

coverage, insurance products, or insurance services, an insurance

agent has the exclusive use of expirations, records, or other

written or electronic information directly related to an

application for pool coverage submitted to the agent or to a pool

coverage agreement arranged through the agent.

(b)

The pool may not use expirations, records, or other

written or electronic information related to applications for pool

coverage to solicit, sell, or negotiate the renewal or sale of

insurance coverage, insurance products, or insurance services to

members, either directly or by providing the information to others,

without the express written consent of an insurance agent.

(c)

The pool may use the expirations, records, or other

written or electronic information related to an application for

pool coverage to review the application, to issue a pool coverage

agreement, or for any other purpose necessary for arranging pool

coverage through an insurance agent. The pool may also use the

agent's expirations, records, or other written or electronic

information for any other purpose that does not involve the

soliciting, selling, or negotiating the renewal or sale of group

self-insurance coverage, insurance products, or insurance

services.

Sec.

2214.254.

AGENT LOST COMMISSION CLAIMS. (a) An

insurance agent's claim for lost commissions shall be resolved in

accordance with dispute resolution terms in the applicable agent

contract. In the absence of any dispute resolution terms, the

parties shall attempt to resolve the dispute through mediation.

(b)

If the claim is not resolved through mediation, the

parties may agree to submit the claim to binding arbitration. In

the absence of an agreement to resolve the claim through binding

arbitration, an insurance agent may bring an action against the

pool for the claim.

Sec.

2214.255.

OTHER AGREEMENTS AUTHORIZED. The board or

pool administrator and an insurance agent may, in a written

agreement separate from the agency contract, mutually agree to

terms different from the provisions provided by this subchapter.

Sec.

2214.256.

EXEMPTIONS FROM SUBCHAPTER. This subchapter

does not apply to:

(1)

a pool coverage agreement provided by the pool on

request, individually or through a pool administrator;

(2)

an insurance agent contract for the insurance

agent's exclusive representation of one pool member or prospective

pool member or a group of affiliated members or prospective

members, in which case the rights of the agent are determined by the

terms of the contract;

(3)

a default by an insurance agent for nonpayment of

premiums under the insurance agent's contract with the pool; or

(4)

a terminated insurance agent contract if the pool

is required by law to continue coverage for the member, in which

case the pool shall continue to pay the insurance agent commission

on the pool coverage agreements issued under that contract that the

pool is required to renew during the 36-month period following the

effective date of the termination, provided that the commission is

paid at the pool's prevailing commission rates in effect on the date

of renewal for that class or line of coverage in effect on the date

of renewal for agents whose contracts are not terminated.

SUBCHAPTER G. RECORDS

Sec. 2214.301. DEFINITIONS. In this subchapter:

(1) "Copy" includes a photograph or reproduction.

(2)

"Record" means a book, record, document, account,

or voucher.

Sec.

2214.302.

MAINTENANCE AND AVAILABILITY OF POOL

RECORDS. (a) The pool shall maintain and make available to the

department all pool records to allow the commissioner to determine

that the pool's financial condition, affairs, and operations are in

compliance with this chapter.

(b)

Except as provided by Subsection (c), the pool shall

maintain in this state the original or a copy of a record for the

purpose of commissioner examination until the earlier of:

(1)

the date the commissioner approves disposal of the

record; or

(2) the later of:

(A)

the first day of the examination period

following the examination period in which the record is examined by

the commissioner; or

(B)

the fifth anniversary of the creation of the

record.

(c)

The pool shall permanently maintain an original or

certified copy of a record in which a member agrees to or

acknowledges the members' joint and several liability for

liabilities incurred by the pool.

Sec.

2214.303.

CONFIDENTIALITY OF RECORDS. Except as

otherwise provided by this chapter, the pool's records and any

records of the department associated with the pool are confidential

and not subject to disclosure under Chapter 552, Government Code.

SUBCHAPTER H. FINANCIAL PROVISIONS

Sec.

2214.351.

INITIAL FINANCIAL REQUIREMENTS. (a) To

maintain the pool's financial stability, the commissioner shall, at

times determined necessary by the commissioner, require two or more

members to maintain:

(1) a minimum combined net worth of $1 million; and

(2)

a current assets to current liabilities ratio of

at least one-to-one.

(b)

After the pool has been operating for three years and

has a total surplus of $3 million, the commissioner may waive any

requirements imposed under Subsection (a).

(c)

The pool must maintain at least $750,000 in earned

premiums in the pool's first year of operation as documented in the

pool's audited financial statement prepared in accordance with

generally accepted accounting principles.

(d)

During the pool's first year of operation, the board

shall submit to the department:

(1)

a safekeeping receipt or trust receipt from a bank

or savings and loan association doing business in this state

indicating that the board has deposited and pledged:

(A) $100,000; or

(B)

bonds of the United States, this state, or a

political subdivision of this state having a par value of $100,000;

or

(2)

a surety bond issued by a corporate surety

authorized to engage in business in this state in an amount of

$100,000 to secure the pool's obligations.

Sec.

2214.352.

EARNED PREMIUM REQUIREMENTS. Each year

after the pool's first year of operation, the pool shall maintain at

least $2 million in earned premiums as documented on the pool's

audited financial statement prepared in accordance with generally

accepted accounting principles.

Sec.

2214.353.

SECURITY. Each year after the pool's first

year of operation, the pool's board shall submit to the department:

(1)

a safekeeping receipt or trust receipt from a bank

or savings and loan association doing business in this state

indicating that the board has deposited and pledged:

(A) $250,000; or

(B)

bonds of the United States, this state, or

any political subdivision of this state having a par value of

$250,000; or

(2)

a surety bond issued by a corporate surety

authorized to engage in business in this state, in the amount of

$250,000 to secure the pool's obligations.

Sec.

2214.354.

RESERVE ACCOUNT. (a)

To maintain the

financial stability of the pool, the board shall annually assess

each member a reserve payment in an amount that is a percentage of

the premium owed by the member for that year.

(b)

Before assessing a reserve payment under Subsection

(a), the board must obtain approval from the commissioner of the

percentage amount to be paid by all members.

(c)

The board shall deposit all reserve payments into a

separate reserve account and shall maintain the account at all

times while the pool is in operation. The board may not withdraw

money from the reserve account without commissioner approval.

Sec.

2214.355.

EXCESS INSURANCE AND REINSURANCE. (a) The

pool shall maintain, on a fiscal year basis, a contract of specific

excess insurance or reinsurance of not less than an amount that is

actuarially sound and approved by the commissioner.

The maximum

retention under the contract may not exceed amounts provided by the

commissioner.

The commissioner must approve an excess insurance or

reinsurance contract before use by the pool.

(b)

Solely for purposes of authorizing the purchase of

reinsurance under this section, the pool is considered an insurer.

(c)

The board may purchase excess insurance or reinsurance

from a domestic or foreign company, subject to Chapter 493 and

Financial Accounting Standards Board Statement No. 113, Accounting

and Reporting for Reinsurance of Short-Duration and Long-Duration

Contracts.

(d)

To be eligible to write excess coverage for the pool, a

casualty insurer must have on file with the department the

insurer's current financial statement showing assets, including

any surplus to policyholders, at least equal to the current

commissioner requirements for admission of a new company to engage

in business in this state. The board may enter into a contract for

excess insurance coverage with an active underwriter of Lloyd's of

London with prior commissioner approval.

(e)

In addition to the requirements described by Subsection

(c) or (d), as applicable, the board must purchase excess insurance

or reinsurance only from a company having an eligible rating of at

least:

(1) "A-" by A.M. Best Company, Inc.;

(2) "A-" by Fitch Ratings Ltd.;

(3) "A" by Weiss Ratings;

(4)

"A-" by Standard & Poor's Financial Services LLC;

or

(5) "A3" by Moody's Investors Service, Inc.

Sec.

2214.356.

FINANCIAL STATEMENTS AND REPORTS. The board

shall file with the department financial statements and financial

reports, including financial statements audited by an independent

certified public accountant and actuarial reports, as may be

required by the commissioner under rules adopted under this

chapter.

Sec.

2214.357.

MEMBER REFUNDS. The board may declare as

refundable to members any money exceeding the amount necessary to

fulfill the pool's obligations. The board may distribute the

refund at board's discretion, in accordance with the plan of

operation, provided that:

(1)

the amount of the refund does not exceed the

members' distributions payable and is recorded on the pool's

balance sheet as indicated by the most recently completed audited

financial statements of the pool; and

(2)

the board provides written notice of the refund to

the department not later than the 10th day before the date the board

provides the refund.

Sec.

2214.358.

INVESTMENTS. (a)

The board may invest pool

money only in a security or other investment authorized by this

section that is interest-bearing, interest-accruing,

dividend-paying, or income-paying and that is not in default.

A

pool investment is exclusively for the benefit of the pool and the

board shall deposit the investment's interest or income in the

fund.

(b)

The board may invest pool money not needed for current

obligations in:

(1)

a deposit in a federally insured bank or savings

and loan association that is:

(A)

insured by the Federal Deposit Insurance

Corporation; or

(B)

collateralized by direct obligations of the

United States;

(2)

bonds or securities not in default as to principal

or interest that are obligations of the United States;

(3)

pass-through mortgage-backed securities and

collateralized mortgage obligations issued by the Federal National

Mortgage Association, the Government National Mortgage

Association, the Federal Home Loan Mortgage Corporation, or the

Federal Housing Administration, provided that the collateralized

mortgage obligations have a minimum financial strength of "A" by

Moody's Investors Service, Inc., Standard & Poor's Financial

Services LLC, or Fitch Ratings Ltd.;

(4)

obligations of this state or a political

subdivision of this state having a minimum financial strength of

"A" by Moody's Investors Service, Inc., Standard & Poor's Financial

Services LLC, or Fitch Ratings Ltd., provided that not more than 5

percent of the pool's assets are invested in any particular issue

and the type of investment does not exceed 15 percent of the pool's

assets in the aggregate;

(5)

obligations of any state or a political

subdivision of that state having a minimum financial strength of

"A" by Moody's Investors Service, Inc., Standard & Poor's Financial

Services LLC, or Fitch Ratings Ltd., provided that not more than 5

percent of the pool's assets are invested in any particular issue

and the type of investment does not exceed 15 percent of the pool's

assets in the aggregate;

(6)

commercial mortgage-backed securities with

purchases having a minimum final strength of "Aaa" by Moody's

Investors Service, Inc., "AAA" By Standard & Poor's Financial

Services LLC, or "AAA" by Fitch Ratings Ltd., provided that not more

than 2 percent of the pool's assets are invested in one issue and

this type of investment does not exceed 10 percent of the pool's

assets in the aggregate;

(7)

asset-backed securities with purchases having a

minimum financial strength of "Aa" by Moody's Investors Service,

Inc., "AA" by Standard & Poor's Financial Services LLC, or "AA" by

Fitch Ratings Ltd., provided that no more than 5 percent of the

pool's assets are invested in one issue and this type of investment

does not exceed 10 percent of the pool's assets in the aggregate;

(8)

repurchase agreements when the collateral for the

agreement is a direct obligation of the United States, provided

that the repurchase agreement:

(A) is in writing;

(B) has a specific maturity date;

(C)

adequately identifies each security to which

the agreement applies; and

(D)

states that in the event of default by the

party agreeing to repurchase the securities described in the

agreement at the term contained in the agreement, title to the

described securities passes immediately to the pool without

recourse;

(9)

corporate bonds having a minimum financial

strength of "Baa" by Moody's Investors Service, Inc., "BBB" by

Standard & Poor's Financial Services LLC, or "BBB" by Fitch Ratings

Ltd., provided that:

(A)

except as provided by Subsection (c),

corporate bonds of any particular issue or issuer constitute not

more than 5 percent of the pool's assets; and

(B)

except as provided by Subsection (c), not

more than 50 percent of the pool's assets are invested in corporate

bonds of all types;

(10)

mutual or trust fund institutions registered with

the Securities and Exchange Commission that have underlying

investments consisting solely of securities approved for

investment as provided by this section, provided that this

investment does not exceed 50 percent of the pool's assets in the

aggregate;

(11) individual equities, provided that:

(A)

individual equities and any mutual funds or

exchange-traded funds do not exceed 15 percent of the pool's

assets;

(B)

the pool holds a minimum of 5 different

issues in the equity sector to provide for diversification;

(C)

no single issue constitutes more than 5

percent, at cost, of the pool's overall investment fund;

(D)

market capitalization for each issue is of at

least $1 billion;

(E) each eligible issue pays a cash dividend; and

(F) the equity holdings are restricted to:

(i)

high-quality, readily marketable

securities corporations that are domiciled in the United States and

that are actively traded on the major United States exchanges,

including the New York Stock Exchange and the National Association

of Securities Dealers Automated Quotation System; or

(ii)

equities of foreign-domiciled

corporations that trade American depositary receipts on the major

United States exchanges; and

(12)

a mutual fund or exchange-traded fund, provided

that:

(A)

the mutual fund or exchanged-traded fund pays

a dividend and consists of securities that have an average market

capitalization of at least $1 billion;

(B)

the same general quality requirements

described by Subdivision (11) are met; and

(C)

the aggregate total of the investment, plus

any individual securities, does not exceed 15 percent of the pool's

assets.

(c)

The board may invest in corporate bonds in excess of the

5 percent and 50 percent limitations specified under Subsections

(b)(9)(A) and (B) up to an additional 10 percent of the pool's

assets if the financial circumstances are acceptable to the

commissioner, such as an increase in market value after initial

purchase of a corporate bond, provided that:

(1)

the initial purchase of corporate bonds was within

the limitations specified under Subsections (b)(9)(A) and (B); and

(2)

in determining the financial condition of the

pool, the commissioner does not include as assets of the pool those

corporate bonds that exceed 50 percent of the pool's total assets.

(d)

Except as provided by Subsection (e), the board may not

invest in rental assets, including:

(1) any item that is not actually owned by the pool;

(2)

any item of which the ownership is subject to

resolution, rescission, or revocation on the pool's insolvency,

receivership, bankruptcy, statutory supervision, rehabilitation,

or liquidation or on the occurrence of any other contingency;

(3)

any item for which the pool pays a regular or

periodic fee for the right to carry the item as an asset, whether

the fee is characterized as a rental fee, a management fee, or a

dividend not previously approved by the commissioner, or makes

another periodic payment for that right;

(4)

any asset purchased for investment by the pool on

credit in which the interest rate paid by the pool on its credit

instrument is greater than the interest rate or yield generated by

the purchased asset;

(5)

any asset on the pool's balance sheet subject to a

mortgage, lien, privilege, preference, pledge, charge, or other

encumbrance that is not accurately reflected in the liability

section of the pool's balance sheet; and

(6)

any asset received by the pool as a contribution to

capital or surplus from any person that meets any of the criteria

described by Subdivisions (1) through (5) while in the hands of that

contributing person or on or after the moment of the contribution to

capital.

(e)

Subsection (d)(3) does not apply to leases capitalized

under generally accepted accounting principles.

Sec.

2214.359.

CONSECUTIVE NET LOSSES. (a)

This section

applies if the pool has:

(1)

three years of consecutive net losses on the pool's

audited financial statements; or

(2)

two years of consecutive net losses on the pool's

audited financial statements of more than the greater of:

(A) $500,000; or

(B)

five percent of the premium of the latest

audited financial statement.

(b)

If a condition described by Subsection (a) exists, an

authorized representative of the board shall:

(1)

attend a meeting with the department, the pool

administrator, and any third-party administrator to discuss the

financial condition of the pool and to advise the department of the

course of action the pool will take to obtain net incomes on

subsequently audited financial statements;

(2)

file with the department a written plan signed by

the board describing the actions the pool will take to generate net

incomes on subsequently audited financial statements; and

(3)

obtain an actuarial rate analysis, if an actuarial

rate analysis was not performed for the previous fiscal year.

Sec.

2214.360.

INSOLVENCY PLAN. (a) In this section,

"insolvent" means the condition in which the pool has liabilities

greater than the pool's assets as determined in accordance with

generally accepted accounting principles.

(b)

If the pool becomes insolvent, the board shall file with

the department, not later than the 60th day after the date the board

becomes aware of the insolvency, a written plan to resolve the

insolvency signed by the board. In determining whether the pool is

insolvent, intangible property such as patents, trade names, or

goodwill may not be considered to be assets of the pool.

(c)

The insolvency plan must provide in detail the means by

which the board intends to eliminate the insolvency, including any

assessment of the members the board determines is necessary, the

timetable for implementing the plan, and the reporting that will be

made to the department regarding the progress of the plan, and

include any other information required by the commissioner.

(d)

The commissioner shall review the insolvency plan and

notify the board of the plan's approval or disapproval not later

than the 30th day after the date the department receives the plan.

(e)

The commissioner shall provide written notice to the

board of a determination that:

(1)

the insolvency plan submitted by the board is

disapproved; or

(2)

the pool is not implementing a plan approved by the

commissioner in accordance with the plan's terms.

Sec.

2214.361.

SUPERVISION, CONSERVATORSHIP, OR

RECEIVERSHIP.

(a)

In this section:

(1)

"Hazardous financial condition" means a condition

in which, based on the pool's present or reasonably anticipated

financial condition, the pool, although not yet financially

impaired or insolvent, is unlikely to be able to:

(A)

meet the pool's obligations to members with

respect to known claims and reasonably anticipated claims; or

(B)

pay other obligations in the normal course of

business.

(2)

"Insolvent" has the meaning assigned by Section

2214.360.

(b)

In addition to any other powers of the commissioner, if

the commissioner determines that the pool is insolvent, is

operating in a hazardous financial condition, or is otherwise

operating in violation of this chapter, the commissioner may take

any action against the pool that the commissioner could take

against an insurer under Chapter 441 or Chapter 443.

SUBCHAPTER I.

COMMISSIONER EXAMINATION

Sec.

2214.401.

EXAMINATION REQUIRED. (a)

The commissioner

shall conduct an examination of the pool at least once every five

years and at other times as the commissioner considers necessary.

(b)

The examination shall be conducted in the same manner as

an examination of an insurer under Chapter 401.

(c)

In conducting an examination of the pool, the

commissioner has the same powers and duties with respect to the

pool, and with respect to other persons in relation to the pool's

affairs and condition, that the commissioner has with respect to an

insurer or other persons with respect to an insurer's affairs and

condition.

SUBCHAPTER J.

DISSOLUTION OF POOL

Sec.

2214.451.

APPLICATION FOR VOLUNTARY DISSOLUTION. (a)

If the members of the pool elect to dissolve the pool, the board

must apply to the commissioner in the form and manner prescribed by

the commissioner for the authority to dissolve.

(b)

The commissioner shall approve or disapprove an

application to dissolve the pool not later than the 60th day after

the date the commissioner receives the application.

(c)

The commissioner shall approve an application to

dissolve the pool if the pool:

(1)

has no outstanding liabilities including incurred

but not reported liabilities; or

(2)

is covered by an irrevocable commitment from an

authorized insurer that provides for payment of all outstanding

liabilities and related services, including payment of claims,

preparation of reports, and administration of transactions

associated with the period during which the pool provided pool

coverage.

Sec.

2214.452.

DISTRIBUTION OF POOL ASSETS. On the pool's

dissolution and after payment of all outstanding liabilities and

indebtedness, the pool assets shall be distributed to the members

under a distribution plan submitted by the board to the department

and approved by the commissioner.

Sec.

2214.453.

DISSOLUTION WITHOUT APPROVAL. (a)

Dissolution of the pool without authorization is prohibited.

(b)

The dissolution of the pool in violation of this section

does not absolve or release the pool, a member, or any individual or

entity that has executed an indemnity agreement in connection with

the pool from obligations incurred or entered into before the

dissolution.

SUBCHAPTER K.

ENFORCEMENT

Sec.

2214.501.

CONSUMER COMPLAINTS; ADMINISTRATIVE

PENALTY.

(a)

A consumer may file a complaint with the department

to report a suspected violation of this chapter or the failure of

the pool to meet its obligations under a pool coverage agreement or

the plan of operation.

(b)

After investigating a complaint regarding the pool, the

commissioner may order the board to take a corrective action the

commissioner considers necessary instead of taking an enforcement

action under another provision of this subchapter.

Sec.

2214.502.

CORRECTIVE ACTION PLAN. (a)

The

commissioner may order the board to submit a corrective action plan

to remediate any noncompliance or financial issues affecting the

pool.

(b)

The board shall submit the completed corrective action

plan to the commissioner for approval and include standards, time

frames, and other parameters acceptable to the commissioner.

(c) The corrective action plan may include:

(1) mandatory training;

(2)

on-site or off-site monitoring and supervision of

the activities of the pool for a specific period of time to

determine progress regarding correction of deficiencies;

(3) the submission of written progress reports;

(4)

the institution of measures to conserve or

generate additional funding for the pool; or

(5)

the imposition of an administrative penalty under

Section 2214.504 for any future misconduct of the kind that

contributed to the need for the imposition of the corrective action

plan.

(d)

Failure by the pool to comply with the corrective action

plan may result in:

(1)

the imposition of an administrative penalty under

Section 2214.504;

(2)

suspension or revocation of the pool's certificate

of authority; or

(3) placement of the pool into supervision.

Sec.

2214.503.

CEASE AND DESIST ORDER; SUSPENSION OR

REVOCATION OF CERTIFICATE OF AUTHORITY.

(a)

If the commissioner

determines the pool has violated this chapter, a commissioner rule,

or any order or directive issued by the commissioner, the

commissioner may:

(1)

order the pool to cease and desist from the conduct

constituting the violation; or

(2)

suspend or revoke the pool's certificate of

authority.

(b)

A cease and desist order issued under this section may

include a prohibition on issuing or renewing pool coverage.

Sec.

2214.504.

ADMINISTRATIVE PENALTY. If the commissioner

determines that the pool or any trustee, member, officer,

administrator, or employee of the pool has violated this chapter,

any other applicable law relating to the pool, a commissioner rule,

or any order or directive issued by the commissioner, the

commissioner may impose an administrative penalty not to exceed

$2,000 for an initial violation. For a subsequent violation, the

commissioner may impose an administrative penalty not to exceed

$4,000.

SECTION 2. A board of trustees may not apply for a

certificate of authority under Section 2214.101, Insurance Code, as

added by this Act, before January 1, 2026.

SECTION 3. This Act takes effect September 1, 2025.

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