Subchapter J. Examination Expenses and Assessments
28 TAC §7.1012
1. INTRODUCTION. The Texas Department of Insurance proposes amendments to §7.1012 concerning assessments to cover the expenses of examining domestic and foreign insurance companies. The amendments are necessary to adjust the rates of assessment to be levied against and collected from each domestic insurance company based on admitted assets and gross premium receipts for the 2005 calendar year, and from each foreign insurance company examined during the 2006 calendar year based on a percentage of the gross salary paid to an examiner for each month or part of a month during which the examination is made. The assessments made under authority of this proposed section will be in addition to, and not in lieu of any other charge which may be made under law, including the Insurance Code Article 1.16.
The department will consider the proposed amendment to §7.1012 in a public hearing under Docket No. 2631, scheduled for 9:30 a.m. on December 12, 2005 in Room 100 of the William P. Hobby Jr. State Office Building, 333 Guadalupe Street in Austin, Texas.
2. FISCAL NOTE. Jacque Canady, Chief Financial Officer, has determined that for the first five-year period the proposed amendments are in effect, the anticipated fiscal impact on state government is estimated income of $9,945,440 to the state's general revenue fund. There will be no fiscal implications for local government as a result of enforcing or administering the section, and there will be no effect on local employment or the local economy.
3. PUBLIC BENEFIT/COST NOTE. Ms. Canady has determined that for each year of the first five years the proposed amendments are in effect, the public benefit anticipated as a result of enforcing the section will be adequate and reasonable assessment rates to defray the state's expenses of domestic and foreign insurer examinations and administration of the laws related to these examinations during the 2006 calendar year. Ms. Canady has determined that the direct economic cost to entities required to comply with the proposed amendments will vary. The amount of the assessment in 2006 for domestic companies will be . 00299 of 1.0% of the company's admitted assets as of December 31, 2005 (excluding pension assets specified in subsection (b)(2)(A)) and .00954 of 1.0% of the company's gross premium receipts for 2005 (excluding pension related premiums specified in subsection (b)(2)(B) and premiums related to welfare benefits described in subsection (b)(5)). The amount of the assessment in 2006 for foreign companies examined in 2006 will be 34% of the gross salary paid to each examiner for each month or partial month of the examination in order to cover the examiner's longevity pay; state contributions to retirement, social security, and the state paid portion of insurance premiums; and vacation and sick leave accruals. There are two components of costs for entities required to comply with the proposal: the cost to gather the information, calculate the assessment and complete the required forms; and the cost of the assessment. Based on information obtained by the department, the actual cost of gathering the information required to fill out the form, calculate the assessment and complete the form will be the same for micro, small and large businesses. Generally, a person familiar with the accounting records of the company and accounting practices in general will perf orm the activities necessary to comply with the section. Such persons are similarly compensated by small and large insurers. The compensation is generally between $17 - $30 an hour. The department estimates that, regardless of whether the company is micro, small, or large, the required form can be completed in two hours. The requirement to pay the assessment necessary to cover the expenses of company examination is the result of legislative enactment and is not a result of the adoption or enforcement of this proposal. There is no difference in proposed rates of assessment for micro, small and large businesses, except that for those domestic companies with an overhead assessment of less than $25 as computed under §7.1012(b)(2)(A) a minimum overhead assessment of $25 will be assessed. The department after considering the purpose of the authorizing statutes does not believe it is legal or feasible to waive or modify the requirements of the proposal for small and micro businesses.
4. REQUEST FOR PUBLIC COMMENT. To be considered, written comments on the proposal must be submitted no later than 5:00 p.m. on December 26, 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 should be simultaneously submitted to Jacque Canady, Chief Financial Officer, Mail Code 108-1A, 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 amendments are proposed under the Insurance Code Article 1.16 and §36.001. Insurance Code Article 1.16(a) and (b) authorize the commissioner of insurance to make assessments necessary to cover the expenses of all examinations of domestic insurance companies by the department or under its authority and to cover all the expenses and disbursements necessary to comply with the provisions of the Insurance Code Articles 1.16, 1.17, and 1.18, in such amounts as the commissioner certifies to be just and reasonable. Article 1.16(f) provide that expenses incurred in the examination of foreign insurers by department examiners and other department personnel shall be collected by the commissioner by assessment. Section 36.001 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 articles and sections of the Insurance Code are affected by this rule: Articles 1.16, 1.17, 1.17A, 1.18, 1.19, §§221.001 - 221.007, 222.001 - 222.008, and 803.007.
§7.1012. Domestic and Foreign Insurance Company Examination Assessments,
(a) Foreign insurance companies examined during the
2005 ] calendar year shall pay for examination expenses according to the overhead rate of assessment specified in this subsection in addition to all other payments required by law including, but not limited to, the Insurance Code Article 1.16. Each foreign insurance company examined shall pay
33% ] of the gross salary paid to each examiner for each month or partial month of the examination in order to cover the examiner's longevity pay; state contributions to retirement, social security, and the state paid portion of insurance premiums; and vacation and sick leave accruals. The overhead assessment will be levied with each month's billing.
(b) Domestic insurance companies shall pay according to this subsection and rates of assessment herein for examination expenses as provided in the Insurance Code Article 1.16.
(1) The actual salaries and expenses of the examiners allocable to such examination shall be paid. The annual salary of each examiner is to be divided by the total number of working days in a year, and the company is to be assessed the part of the annual salary attributable to each working day the examiner examines the company during
2005 ]. The expenses assessed shall be those actually incurred by the examiner to the extent permitted by law.
(2) An overhead assessment to cover administrative departmental expenses attributable to examination of companies, which shall be paid and computed as follows:
(A) .00299 [
.00045 ] of 1.0% of the admitted assets of the company as of December 31,
2004 ], upon the corporations or associations to be examined taking into consideration the annual admitted assets that are not attributable to 90% of pension plan contracts as defined in Section 818(a) of the Internal Revenue Code of 1986 (26 U.S.C. Section 818(a)); and
(B) .00954 [
00128 ] of 1.0% of the gross premium receipts of the company for the year
2004 ], upon the corporations or associations to be examined taking into consideration the annual premium receipts that are not attributable to 90% of pension plan contracts as defined in Section 818(a) of the Internal Revenue Code of 1986 (26 U.S.C. Section 818(a)).
(3) If the overhead assessment, as computed under paragraph (2)(A) and (B) of this subsection, produces an overhead assessment of less than a $25 total, a minimum overhead assessment of $25 shall be levied and collected.
(4) The overhead assessments are based on the assets and premium receipts reported in the annual statements, except where there has been an understating of assets and/or premium receipts.
(5) For the purpose of applying paragraph (2)(B) of this subsection, the term "gross premium receipts" does not include insurance premiums for insurance contracted for by a state or federal government entity to provide welfare benefits to designated welfare recipients or contracted for in accordance with or in furtherance of the Texas Human Resources Code, Title 2, or the federal Social Security Act (42 U.S.C. §301 et seq.)
(c) The overhead assessment assessed under subsections (b)(2) and (b)(3) of this section shall be payable and due to the Texas Department of Insurance, P.O. Box 149104, MC 108-3A, Austin, Texas 78714-9104 within 30 days of the invoice date.