(a) No dividend shall take effect or may be paid until approved by the State Board of Insurance.
(b) A dividend may only be paid out of earned surplus.
(c) A pro rata earned dividend must be paid on a participating policy which is terminated prior to its expiration date, if a dividend is otherwise declared and paid for that class of policies.
(d) A dividend may not be paid until the policy expires.
(e) A dividend may not be promised or guaranteed to policyholders.
(f) Dividends shall be disbursed uniformly by classes.
(g) The policy contract must contain the standard participation language approved by the State Board of Insurance.
(h) Earned dividends may not be used by the company to extend or renew policies without the insured's consent. A company may extend or renew policies by application of earned dividends on individual company forms or billings which meet the following minimum requirements:
  (1) the insured must be given written notice of his or her right to either accept his earned dividend or agree to the application of his earned dividend to an extension or renewal policy;
  (2) the amount of the earned dividend and the number of days the policy is to be extended must be shown in the notice.
(i) Participating companies shall submit a dividend application to the commissioner of insurance at least annually.
(j) If, after a company receives approval to pay dividends, it wishes to discontinue dividend payments, change its rate of dividend, or change the classes for which dividend approval was previously granted, it shall notify the the commissioner of insurance by letter. If additional funds will be needed to pay dividends covering policies expiring during the period approved, the company must file an amended application requesting approval of the additional amount.

Source Note: The provisions of this §5.1102 adopted to be effective October 28, 1983, 8 TexReg 4187.