In the Biennial report of the Texas Department of Insurance (the “TDI”) to the 81st Texas Legislature, a recommendation was submitted to create an unauthorized insurance guaranty fund. Typically, state guaranty funds are created to help pay the claims of financially impaired insurance companies. State laws specify the lines of insurance covered by these funds and the dollar limits payable. Coverage is usually for individual policyholders and their beneficiaries and not for values held in unallocated group contracts. Texas’ current guaranty association consists of licensed insurers and only covers claims of its member companies. The unauthorized insurance guaranty fund proposed by the TDI will provide the receiver with funding to pay claims of unauthorized insurers. Funds will be derived from fines and penalties imposed on unlicensed insurance entities and licensed entities that are doing insurance business without authorization.
Click here for a copy of the report, which includes the recommendation described above.