An insurer may be found to be in hazardous condition when one or more of the following conditions are found to exist by the commissioner:

1. (1) an insurer does not file a financial statement within the time required by the Insurance Code or as requested by the agency;
2. (2) an insurer files financial information which is false or misleading;
3. (3) an insurer does not grant authorization to amend its financial statement when requested by the agency to grant such authorization;
4. (4) an insurer overstates its surplus by 25 percent or more;
5. (5) an insurer's unassigned surplus has a deficit which is in excess of 20 percent of surplus;
6. (6) an insurer's financial ratios are outside the acceptable ranges as established by the National Association of Insurance Commissioners in the Insurance Regulatory Information System;
7. (7) the net reduction (excluding net income and change in paid-in capital and change in paid-in or contributed surplus) to the insurer's surplus is greater than 25 percent of beginning surplus on the insurer's annual financial statements;
8. (8) a projection by the agency of an insurer's current financial condition indicates that the sum of its paid-in capital, paid-in surplus, and contributed surplus will be reduced within the next 12 months;
9. (9) an insurer's aggregate net retained risk, direct or assumed, under any one insurance policy or certificate of insurance under a group policy, is more than 10 percent of the insurer's surplus, except where otherwise permitted by law;
10. (10) an insurer's reserves for losses and loss adjustment expenses are discounted more than 10 percent of surplus;
11. (11) an insurer has reinsurance reserve credits, recoverables, or receivables which are disputed by the reinsurer, or are due and payable and remain unpaid, and such reinsurance credits, recoverables, and receivables are more than 10 percent of an insurer's surplus;
12. (12) an insurer has reinsurance reserve credits, recoverables, or receivables due from insurance companies in receivership, and such are either more than 10 percent of surplus or more than 5 percent of admitted assets;
13. (13) an affiliate or subsidiary of an insurer is unable to pay its obligations as they become due and payable;
14. (14) a life, accident, and health insurer has premium writings which result in surplus being less than 5 percent of the aggregate general account reserves for the life insurance in force plus 25 percent of the net annualized accident and health premium writings;
15. (15) a property and casualty insurer has net premium writings which, if annualized, would be an amount more than 300 percent of surplus;
16. (16) an insurer consistently issues subordinate premium or surplus debentures to finance its operations;

17. (17) an insurer does not maintain books and records sufficient to permit examiners to determine the financial condition of the insurer, examples of which include, but are not limited to:

    1. (A) books and records of a domestic insurer maintained outside the state of Texas in violation of the Insurance Code, Article 1.28;
    2. (B) person(s) responsible for generating or maintaining books of original entry for a domestic insurer are officed outside the state of Texas; or
    3. (C) an insurer moves, or maintains, the location of the books and records necessary to conduct an examination without notifying the agency of such location.
18. (18) an insurer has reinsurance agreements affecting 20 percent or more of the insurer's gross written premiums, direct or assumed, and the assuming insurers are not licensed to do insurance business in the state of Texas;
19. (19) an insurer has reinsurance credits taken or assets claimed on which there are not complete evidence of reinsurance agreements with insurers, signed by the reinsurer, and which are more than 10 percent of surplus;
20. (20) an agreement exists, written or otherwise, which requires all surplus funds which are in excess of an insurer's statutory minimum capital and surplus, or equivalent, to be distributed;
21. (21) an insurer's management does not have the experience, competence, or trustworthiness to operate the insurer in a safe and sound manner;
22. (22) an insurer's management engages in unlawful transactions;
23. (23) an insurer does not comply with the terms of an agreement with an affiliate;
24. (24) the administration of an insurer's business is delegated to a person who, directly or indirectly, produces more than 25 percent of the insurer's gross written premiums, or an insurer delegates an insurance function necessary to the insurer's survival without adequate controls and/or which creates a conflict of interest;
25. (25) one person, other than a full time, salaried employee, controls production of more than 10 percent of the gross written premiums of an insurer;
26. (26) an insurer has a pattern of not settling valid claims within a reasonable time after due proofs of loss have been received;
27. (27) an insurer does not follow a policy on rating and underwriting standards appropriate to the risk;
28. (28) an insurer violates the Insurance Code, Article 21.39-A or Article 21.39-B;
29. (29) a final administrative or judicial order, initiated by an insurance regulatory agency of another state, is issued against an insurer;
30. (30) an insurer is in any condition that the commissioner of insurance finds to present a hazard to policyholders, creditors, or the general public.

Source Note:The provisions of this §8.3 adopted to be effective December 27, 1989, 14 TexReg 6550.