SB 14 Would Threaten the Financial Solvency of Insurance Companies

The bill gives the Commissioner authority to disapprove a withdrawal plan if he finds that a line of insurance is not offered in the state sufficiently to protect the citizens or potential policyholders of the state. This language could allow the Commissioner to require an insurance company to continue writing an unprofitable line of insurance, thereby jeopardizing the financial solvency of the company. Ultimately, this could provoke a rush to withdrawal by companies in an unprofitable line to avoid being trapped with the burden of providing insurance for the entire market.

Additionally, the bill gives the Commissioner the discretion to modify, restrict, or limit the withdrawal plan filed by a company “in any manner the Commissioner decides.” Again, this language provides no predictability and is a disincentive to companies doing business in Texas.

Solution:

The current withdrawal statute ensures that regulated companies selling auto or homeowners insurance must file a withdrawal plan for orderly withdrawal. The language should be expanded to include all companies selling auto or homeowners insurance in Texas. Furthermore, these withdrawal plans should be specific to companies’ individual operations and not related to the condition of the market.