This section defines when a group is insolvent and requires the group to cover deficiencies by making assessments or using specified funds, with the commissioner involved in notices, orders, and liquidation-related action.
Sec. 407A.355. DEFICITS; INSOLVENCIES. (a) For purposes of this section, "insolvent" means: (1) the inability of a group to pay the group's outstanding lawful obligations as they mature in the regular course of business; or (2) that the group's liabilities exceed the group's assets, determined without reducing liabilities by any reserve discount. (b) If the assets of a group are at any time insufficient to enable the group to discharge its legal liabilities and other obligations and to maintain the reserves required under this chapter, the group shall make up the deficiency or levy an assessment on its members for the amount needed to make up the deficiency. (c) In the event of a deficiency in any fund year, the deficiency shall be made up immediately from: (1) surplus from a fund year other than the current fund year; (2) administrative funds; (3) assessments of the membership, if ordered by the group; or (4) any alternate method that the commissioner approves or directs. (d) The commissioner shall be notified before any transfer of surplus funds from one fund year to another under Subsection (c). (e) If the group fails to assess its members or to otherwise make up a deficit, the commissioner shall order the group to do so. If the commissioner determines that the group is in a hazardous financial condition, the commissioner may take action as provided by Article 21.28-A, Insurance Code, and may order the group to rectify the condition through an alternate method under Subsection (c)(4). The group is considered an insurer only for purposes of Article 21.28-A, Insurance Code. Otherwise, to the extent of a conflict between this chapter and that article, this chapter prevails. (f) If the group fails to make the required assessment of its members after the commissioner's order under Subsection (e), or if the deficiency is not fully made up, the group shall be deemed to be insolvent. (g) If a group is liquidated, the commissioner shall secure release of the security deposit and levy an assessment on the members of the group in an amount determined necessary by the commissioner to discharge all liabilities of the group, including the reasonable cost of liquidation. Added by Acts 2003, 78th Leg., ch. 275, Sec. 1, eff. Sept. 1, 2003. SUBCHAPTER I. DISCIPLINARY ACTIONS; PENALTIES