Texas Life and Health Insurance Guaranty Association (“Association”) is a non-profit legal entity created by the Texas legislature in 1973 to protect Texas resident policyholders in the event of the insolvency and liquidation of a member insurance company. To provide this protection, the Association either continues the insurance policy coverage while paying the claims and other policy benefits or funding the transfer of the policies to another insurance company.
When a court finds an insurance company to be insolvent and orders it liquidated, a receiver takes over the insurer under the court’s supervision, and liquidates the assets and liabilities, except the task of administering the insurance policies is the responsibility of the Association. The Association then becomes one of the claimants against the estate of the insolvent insurance company to the extent of the payments and benefits it has provided to policyholders. As the assets of the insolvent company are liquidated, the Association may recover a portion of its costs to protect the policyholders. The Association’s Board of Directors determines the amount needed to service that company’s policies and sends an assessment, or bill, to the other member insurance companies (the approximately 1,100 insurance companies licensed in Texas to sell the types of policies protected by the Association).
The Association operates as provided for in the Texas Insurance Code Chapter 463 (2012). The nine members of the Board of Directors are appointed by the Commissioner of Insurance. Five of the directors are required to be officers or employees of member insurance companies licensed in Texas, and three of these five must be from a company that is one of the top fifty premium writers in Texas. The remaining four must be “public” directors that are independent of the insurance industry.
There are regular quarterly meetings of the Board each year in Austin, plus special meetings as required. Meetings are noticed and held in compliance with the Texas Open Meetings Act. A director receives no compensation but is entitled to receive reimbursement of expenses related to Association activities. A specific personal financial statement must be filed annually by each director with the Texas Ethics Commission. The Board and the Association are governed by statute, its Plan of Operation and its Bylaws.