28 Tex. Admin. Code § 5.3104 - Policyholder Dividends
(a) On policies
written on and after July 1, 1970, by all stock and mutual insurance companies
writing fire and allied lines of insurance in Texas within the contemplation of
the Insurance Code of 1951, Chapter 5, Subchapter C, as amended, the company
may not under such policies pay policyholder dividends until and unless the
company proposing to pay such dividends shall have first applied to and secured
the approval of the State Board of Insurance authorizing such payments in the
amount proposed to be disbursed. Applications for such approvals shall be filed
at least 60 days prior to the commencement of the period in which disbursements
are proposed to be made. Approvals will be issued for periods no longer than 12
consecutive months.
(b) Pertinent
and primary statutory provisions applicable to dividends are the Insurance
Code, Article 5.41, dealing with rebating and discrimination, and the Insurance
Code, Article 21.31 and Article 21.32, concerning unlawful dividends.
(c) To avoid unlawful discrimination, the
same company may not contemporaneously issue both participating and
nonparticipating policies on fire and allied lines, and any company utilizing
as its plan of operation the issuance of participating policies must include in
all of its contracts on fire and allied lines the uniform provisions relative
to profit sharing which have heretofore been prescribed by the board.
(d) In order that the board may be certain
that the company possesses appropriate surplus profits from which proposed
policyholder dividends can be disbursed, companies shall include with such
applications an analysis of its surplus account of the company upon forms
prescribed by the board.
(e) In
addition, to satisfy the board that the dividends will not discriminate between
individuals or between classes, each application for permission to disburse
policyholder dividends shall set forth in detail the basis upon which such
dividends are proposed to be allocated. As a part of each application a giving
effect balance sheet shall be submitted reflecting the effect that the payments
of dividends will have upon the company, and the continued solvency of the
company in the event of approval of the dividend payment. If the company
proposes to pay a uniform percentage rate of dividend on all expiring fire and
allied lines coverages, including coverages under the Texas Standard Policy and
the fire and allied lines portions of the Texas Standard Farm and Ranchowners
Policy, the board must find on the basis of the facts presented to it that such
proposed dividends comply with the requirements of Article 5.41 as it relates
to discrimination.
(f) If the
company applying for permission to disburse policyholder dividends on fire and
allied lines desires to pay dividends on some classes and not on other classes,
or desires to pay rates of dividends which will vary as between different
classes, the board will require the company to furnish appropriate factual data
showing that its plan for disbursing dividends to its policyholders does not
unlawfully discriminate between individuals or between classes.
(g) These sections of the State Board of
Insurance, and all applicable statutes, relating to the payment of dividends to
policyholders on policies issued hereunder, are applicable to all such policies
of insurance in this state irrespective of the domicile of the insurer.
Dividends based on experience rating of individual risks are not precluded by
these sections.
(h) These sections
will be construed and applied by the board with respect to each application
presented hereunder in such manner as to give protection, to the fullest extent
possible, to the policyholder, and in such manner as to comply with the duty of
the board to protect the public interest.
(i) An application form for approval of the
payment of dividends for fire and allied lines insurance is adopted herein by
reference. Copies of that form may be obtained by contacting the Property
Division, State Board of Insurance, 1110 San Jacinto Street, Austin, Texas
78786.
Notes
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