Texas Insurers Maintenance Taxes and Regulatory Fees

As you are likely aware, in addition to premium taxes, Texas insurers pay maintenance taxes and regulatory fees that are utilized to fund the TDI and its operations. These maintenance taxes and fees also provide funding for other state agencies including the Texas A&M Forest Service, Office of Public Insurance Counsel, Department of Health Services, Office of the Attorney General, Texas Facilities Commission and the Texas Department of Transportation.  So, the TDI is funded solely by the insurance industry that it regulates.

The Texas Department of Insurance (TDI) has in December adopted amendments to 28 Texas Administrative Code, Sections 7.1001 and 1.414, with regards to assessments levied on insurers.

• Bulletin 2016-4849 (§ 1.414), signed on December 14, 2016, addresses the assessment of maintenance taxes and fees;
• Bulletin 2016-4850 (§7.1001), signed on December 14, 2016, addresses the assessments related to examination expenses

The overhead assessment rate to cover administrative departmental expenses attributable to examination of companies is .00086 of 1 percent of the admitted assets of the company as of December 31, 2016 and .00311 of 1 percent of the gross premium receipts of the company for the 2016 year.  This, of course, is in addition to the examiner’s salaries that are paid directly by the company under examination.

The maintenance tax and fee assessment for 2017 based on premiums of insurers for calendar year 2016 will be as follows:

1. for motor vehicle insurance, under Insurance Code §254.002, the rate is .056 of 1 percent;
2. for casualty insurance and fidelity, guaranty, and surety bonds, under Insurance Code §253.002, the rate is .072 of 1 percent;
3. for fire insurance and allied lines, including inland marine, under Insurance Code §252.002, the rate is .364 of 1 percent;
4. for workers’ compensation insurance, under Insurance Code §255.002, the rate is .064 of 1 percent;
5. for workers’ compensation insurance, under Labor Code §403.003, the rate is 1.8 percent;
6. for title insurance, under Insurance Code §271.004, the rate is .103 of 1 percent;
7. The rate for the maintenance tax to be assessed on gross premiums for calendar year 2016 for life, health, and accident insurance and the gross considerations for annuity and endowment contracts, under Insurance Code §257.002, is .040 of 1 percent;
8. Various other rates apply for health maintenance organizations, nonprofit legal services, self-insurer workers’ compensation, etc. which are noted in the Bulletin

Texas insurers will want to incorporate these updates into their budget planning as they prepare for their financial statement and tax accrual development process for the year.