1. (a) An owner or operator may satisfy the requirements of financial assurance for liability as specified in Subchapter E of this chapter (relating to Financial Assurance Requirements for Liability Coverage) by demonstrating that he passes a financial test which conforms to the requirements of this section, in addition to the requirements specified in Subchapter A of this chapter (relating to General Financial Assurance Requirements).

2. (b) To pass this test, the owner or operator must meet the criteria of either paragraph (1) or (2) of this subsection:

   1. (1) the owner or operator must have:

      1. (A) net working capital and tangible net worth each at least six times the amount of liability coverage to be demonstrated by this test; and
      2. (B) tangible net worth of at least $10 million; and

      3. (C) assets in the United States amounting to either:

         1. (i) at least 90% of his total assets; or
         2. (ii) at least six times the amount of liability coverage to be demonstrated by this test.

   2. (2) the owner or operator must have:

      1. (A) a current rating for the owner's or operator's most recent bond issuance of AAA, AA, A, or BBB as issued by Standard and Poor's or Aaa, Aa, A, or Baa as issued by Moody's; and
      2. (B) tangible net worth of at least $10 million; and

      3. (C) assets in the United States amounting to either:

         1. (i) at least 90% of his total assets; or
         2. (ii) at least six times the amount of liability coverage to be demonstrated by this test.

3. (c) To demonstrate that the owner or operator meets this test, the owner or operator shall submit the following items to the executive director:

   1. (1) a letter signed by the owner's or operator's chief financial officer and worded as specified in the Financial Test for Liability, Part A, §37.651 of this title (relating to Financial Test for Liability). If an owner or operator is using the financial test to demonstrate both assurance for closure, as specified in Subchapter B of this chapter (relating to Financial Assurance Requirements for Closure), and liability coverage, he must submit the letter specified in the Financial Test for Liability, Part B, §37.651 of this title to cover both forms of financial responsibility. A separate letter as specified in §37.351 of this title (relating to Financial Test) is not required; and
   2. (2) a copy of the independent certified public accountant's report on examination of the owner's or operator's financial statements for the latest completed fiscal year; and

   3. (3) a special report from the owner's or operator's independent certified public accountant to the owner or operator stating that:

      1. (A) he has compared the data which the letter from the chief financial officer specifies as having been derived from the independently audited, year-end financial statements for the latest fiscal year with the amounts in such financial statements; and
      2. (B) in connection with that procedure, he found such amounts to be in agreement.
4. (d) After the initial submission of items specified in subsection (c) of this section, the owner or operator shall send updated information to the executive director within 90 days after the close of each succeeding fiscal year. This information shall consist of all three items specified in subsection (c) of this section.
5. (e) If the owner or operator no longer meets the requirements of subsection (b) of this section, he shall send notice to the executive director of intent to establish alternate financial assurance as specified in this subchapter. The notice shall be sent by certified mail within 90 days after the end of the fiscal year for which the year-end financial data show that the owner or operator no longer meets the requirements. The owner or operator shall provide the alternate financial assurance within 120 days after the end of such fiscal year.
6. (f) The executive director may, based on a reasonable belief that the owner or operator may no longer meet the requirements of subsection (b) of this section, require reports of financial condition at any time from the owner or operator in addition to those specified in subsection (c) of this section. If the executive director finds, on the basis of such reports or other information, that the owner or operator no longer meets the requirements of subsection (b) of this section, the owner or operator shall provide alternate financial assurance as specified in this subchapter within 30 days after notification of such a finding.
7. (g) The executive director may disallow use of this test on the basis of qualifications in the opinion expressed by the independent certified public accountant in his report on examination of the owner's or operator's financial statements. An adverse opinion or disclaimer of opinion shall be cause for disallowance. The executive director shall evaluate other qualifications on an individual basis. The owner or operator shall provide alternate financial assurance as specified in this section within 30 days after notification of the disallowance.

Source Note:The provisions of this §37.541 adopted to be effective December 30, 1996, 21 TexReg 12297.