Which statement best describes the certificate of authority for an insurer in Texas?

• A. It is illegal for an insurer to transact business in Texas without a certificate of authority.
• B. It authorizes only reinsurance activities.
• C. It lasts only until the end of the fiscal year.
• D. It exempts the insurer from regulatory examinations.

Answer: (A)

The key idea is that a certificate of authority is the legal permission from the Texas Department of Insurance that allows an insurer to transact insurance in the state. Without this document, doing any insurance business in Texas is illegal because the insurer hasn’t met the regulatory requirements to operate there. This certificate applies to the lines the company is authorized to write, not just reinsurance. It isn’t automatically limited to the end of the fiscal year; it remains in effect until it’s revoked, suspended, or surrendered, assuming ongoing compliance and regulatory examinations. It also doesn’t exempt the insurer from regulatory examinations.