Untitled Texas Attorney General Opinion ( 1942 )

EAXTORNEY GENERAL
OFTEXAS
AUSTINI~.TEXAS
GERALD C. MANN
Honorable 0. P. Lockhart, Chairman
Board of Insurance Commissioners
Austin, Texas
Dear Sirr Opinion No. O-4636
Re: Can the Board of Insurance Cormis-
sioners properly limit the amount
of a single risk to whiah a United
States Branch of an alien insurer
licensed in Texae may expose it-
self without reinsurance in the
manner provided in Article 49327
Your letter of September 6, 1942, presenting the above question for
an opinion of this department, reader
"Article 4932, Se&ion 1, sets the limit to which a fire, fire and
marine, marine or inland insurer, may expose itself to a single risk with-
out reinsurence at ten peroent of itr paid up oapital.
'The United States Branches of alien companies have no oapital stock.
Each Branch licensed in Texas is oertified by the Mew York Superintendent
of Insurance to have oomplied with Se&ion 104 of the New York Insurance
Law of 1939, requiring the maintenanoe of minimum deposits with the proper
state officers for the benefit of all its policyholders and oreditors in
the United States. This deposit is a capital account, and when made, has
heretofore been construed to be analogous to the capital stock requirement
of our Article 4993 as one of the predioates to do business in Texas. On
showing of satisfactory oondition of the affairs of the United States
Eranohes (without regard to the parent aompanies abroad) by examination or
annual statement, and the meeting of other eonditione not pertinent here,
the Branches have been licensed in this state under Artiales 4666 and 4919.
"Each of the branches operating in Texas is also licensed in Mew York,
and its requirement of maintenance of 'Trusteed Surplus' has been com-
plied with, as set out and fully defined in Section 96 of its 1939 laws.
"Will you kindly advise me whether this Department may properly limit
the amount of a single riak to which a United States Branch of an alien
insurer licensed in Texas may expose itself without reinsurance in the
manner provided in Artiole 4932: and if so, whether the ratio of the risk
shall be to the 'statutory deposit t desoribed in Section 104 or to the
'Trusteed Surplus* BLIdefined in Section 96 of the Mew York Insurance Laws
of 1939."
Honorable 0. P. Lookhart, Chairman, Page 2 O-4838
Article 4932, Section 1, Revised Civil Statutes, 1925, provides:
"No fire, fire and marine, marine or inland insuranoe company doing
business in this State shall expose itself to any one risk, except when
insuring cotton in bales, and grain, to an amount exceeding ten per cent
of its paid up capital stock, unless the excess shall be insured by such
company in some other solvent insurance company legally authorized to do
business in this State."
The above quoted section of Article 4932 was originally enacted by
the Acts of 1875, 14th Legislature, being at that time a part of Section
8 of Chapter 31 of said Acts from which section, our present Article 4919
is taken. By its language as enacted, such limitation extended to not ex-
ceeding ten percent (lO$) of the "paid up capital" of such companies.
This provision so worded was brought forward in both the Revised Statutes
of 1879 and 1896 as Articles 2967 and 3075, respectively. By the Acts of
1905, 29th Legislature, Chapter 80, this Article was amended by adding
several sections and as it now appears in Section 1, the term "paid up
capital stock" was adopted in lieu of "paid up capital".
It is pointed out by you that the United States branches of the alien
companies have no capital steak. Regardless of what distinction, if any,
should be made, it is apparent by the change as above noted, that neither
of the terms, "paid up capital" nor "paid up capital stock" are to be
construed as equivalent to and meaning statutory deposits or trusteed sur-
pluses in or defined,by the laws of a particular foreign state.
Such oompanies as named in this Article are governed by the provi-
sions of Chapter 11, Title 78 of the Revised Civil Statutes, 1925, wherein
is contained Article 4919 and we fail to find any statutory authority for
the Board of Insurance Commissioners to accept the deposits made by United
States branches of alien companies in the State of New York as either
their "capital“ or "capital stock" within the purview of this statute.
This statute limits the risks to which such character of insurance
companies may be exposed to ten percent (10%) of its paid up capital
stock. It is apparent that such alien branch companies must be considered
as having no paid up capital stock. It seems to us that any application
of this statute as would construe the term "paid up capital stock" as
meaning statutory deposits or trusteed surpluses made in and defined under
the laws of any particular foreign state appears to have been refuted by
the Supreme Court in Glens Falls Insurance Company v. Hawkins, 126 S.W.
1114. Although a stock company was there involved, the Court held that
the surplus it could show of #2,433,826, and urged as a permissible basis
of limitation of risks under the laws of New York, was not to be consid-
ered, and therefore the Court refused to mandamus the Commissioner of
Insurance to issue a certificate to this foreign company who had violated
the statute.
.
Honorsble 0. P. Lockhart, Chairmen, Page 3 O-4838
We are not to be understood as holding herein that Article 4932,
supra, does not apply to suoh alien branch companies nor do we undertake
to decide that there has been any violation of this statute. We have
understood end discussed your request solely upon the assumption that you
would enforce this statute to one or the other capital accounts required
end designated under the laws of New York as "statutory deposit" or
trusteed surplus", neither of which are within the meaning of "paid up
oapital stock" as used in this statute.
You are therefore respectfully advised that in the opinion of this
department, the Board of Insurance Commissioners is not authorized to
accept the statutory deposit or the trusteed surplus made in end as de-
fined by the State of New York by United States branohes of alien compa-
nies doing business in Texas as its "paid up capital stock" within the
provisions of Article 4932, Revised Civil Statutes of Texas, as same
limits any one single risk to which such oharacter of companies named
therein may be exposed.
Yours very truly
ATTORNEY GENERAL OF TEXAS
By s/V& J. R. King
c
Wh. J. R. King
Assistant
%JRK:mp-wo
APPROW;', OCT. 24, 1942
APPROVED
O?~NI@N
COMMLTTEE
BY Bin?
Chairman