An Audit Report on the Department of Insurance's Enforcement of Solvency Standards for Insurance Companies
October 2009
Report Number 10-009
Overall Conclusion
The Department of Insurance (Department) monitored insurance companies for compliance with solvency standards to identify companies with deteriorating financial conditions in accordance with state laws, rules, and internal agency policies and procedures. The Department monitored insurance companies through its licensing, analysis, and financial examination processes. In addition, the Department has implemented measures to manage the conservation and receivership processes to ensure that consumers are protected from companies at risk of becoming insolvent. However, the Department should strengthen its processes by more closely adhering to its internal policies and procedures and maintaining required documentation.
The Department also ensured that new companies met minimum capital and surplus requirements before licensing them. However, it did not always obtain all required documentation prior to issuing a license. In addition, the Department conducted criminal history checks on certain categories of applicants for a license to do business in the state of Texas.
The Department monitored the financial condition of insurance companies by conducting periodic on-site financial examinations and periodic financial analyses of licensed companies. However, the Department should strengthen its examination and analysis processes by consistently adhering to its internal policies and procedures, meeting the required timeframes, and maintaining all required documentation. In addition, the Department should strengthen controls over its Division of Financial Analysis's applications to ensure the security of companies' financial data.
The Department also has conservation and receivership processes in place to help protect consumers from insurance companies that may be at risk of becoming insolvent. However, the Department should strengthen those processes. Specifically, the Department:
- Did not consistently comply with statutory timeframes when managing the administrative actions taken against insurance companies at risk of becoming insolvent.
- Did not consistently document all takeover actions performed after an insurance company was placed into court-ordered receivership.
- Did not follow its policies and procedures to ensure that qualified special deputy receivers are managing the rehabilitation and liquidation of receivership estates.
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