Texas 2009 - 81st Regular

Texas House Bill HB2487 Compare Versions

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1	1	81R8359 PB-F
2	2	By: Eiland H.B. No. 2487
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to the establishment, funding, and operation of the Texas
8	8	natural disaster catastrophe fund and the disaster preparedness and
9	9	mitigation grant council.
10	10	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
11	11	SECTION 1. Subtitle A, Title 10, Insurance Code, is amended
12	12	by adding Chapter 1809 to read as follows:
13	13	CHAPTER 1809. NATURAL DISASTER CATASTROPHE FUND
14	14	SUBCHAPTER A. GENERAL PROVISIONS
15	15	Sec. 1809.001. SHORT TITLE. This chapter may be cited as
16	16	the Texas Natural Disaster Catastrophe Fund Act.
17	17	Sec. 1809.002. FINDINGS; PURPOSE. (a) The legislature
18	18	finds that there is a compelling state interest in maintaining a
19	19	viable and orderly private sector market for property insurance in
20	20	this state. To the extent that the private sector is unable to
21	21	maintain such a market in this state, state actions to maintain such
22	22	a market are valid and necessary exercises of the police power.
23	23	(b) The legislature finds that, as a result of unprecedented
24	24	levels of insured losses from natural disasters in recent years,
25	25	numerous insurers have determined that in order to protect their
26	26	solvency, it is necessary for those insurers to reduce their
27	27	exposure to losses from natural disasters. The instability of the
28	28	world reinsurance market, also caused in part by these events, has
29	29	also increased the pressure on insurers to reduce their
30	30	catastrophic exposures.
31	31	(c) The legislature finds that mortgages require reliable
32	32	property insurance, and the unavailability of reliable property
33	33	insurance would make most real estate transactions impossible. In
34	34	addition, the public health, safety, and welfare demand that
35	35	structures damaged or destroyed in a catastrophe be repaired or
36	36	reconstructed as soon as possible. Therefore, the inability of the
37	37	private sector insurance and reinsurance markets to maintain
38	38	sufficient capacity to enable residents of this state to obtain
39	39	property insurance coverage in the private sector endangers the
40	40	economy of this state and endangers the public health, safety, and
41	41	welfare. Accordingly, state action to correct for this inability
42	42	of the private sector constitutes a valid and necessary public and
43	43	governmental purpose.
44	44	(d) The legislature finds that the financial impairments
45	45	resulting from recent natural disasters demonstrate that many
46	46	property insurers are unable or unwilling to maintain reserves,
47	47	surplus, and reinsurance sufficient to enable the insurers to pay
48	48	all claims in full in the event of a major natural disaster. State
49	49	action is therefore necessary to protect the public from an
50	50	insurer's unwillingness or inability to maintain sufficient
51	51	reserves, surplus, and reinsurance.
52	52	(e) The legislature finds that a state program to provide
53	53	reimbursement to insurers for a portion of their catastrophic
54	54	losses will create additional insurance capacity sufficient to
55	55	ameliorate the current dangers to this state's economy and to the
56	56	public health, safety, and welfare.
57	57	(f) It is essential to the efficient functioning of a state
58	58	program to increase insurance capacity that revenues received be
59	59	exempt from federal taxation. It is therefore the intent of the
60	60	legislature that the program under this chapter be structured as a
61	61	state trust fund under the control of the department and operate
62	62	exclusively for the purpose of protecting and advancing the state's
63	63	interest in maintaining insurance capacity in this state.
64	64	Sec. 1809.003. DEFINITIONS. In this chapter:
65	65	(1) "Actuarially indicated" means, with respect to
66	66	premiums paid by insurers for reimbursement provided by the fund,
67	67	an amount determined according to principles of actuarial science
68	68	to be adequate, but not excessive, in the aggregate, to pay current
69	69	and future obligations and expenses of the fund, including
70	70	additional amounts if needed to retire public securities issued
71	71	under Subchapter H, and determined according to principles of
72	72	actuarial science to reflect each insurer's relative exposure to
73	73	losses from covered events.
74	74	(2) "Covered event" means a hurricane, tornado, or
75	75	other type of natural disaster, as specified by rule by the
76	76	commissioner, that results in insured losses in this state and is
77	77	covered by the fund.
78	78	(3) "Covered policy" means a residential property
79	79	insurance policy, or any other policy covering a residential
80	80	structure or the contents of such a structure that is issued by an
81	81	insurer authorized to engage in the business of residential
82	82	property insurance in this state. The term does not include a
83	83	reinsurance agreement or any policy that excludes coverage for a
84	84	peril described by Subdivision (2).
85	85	(4) "Fund" means the Texas natural disaster
86	86	catastrophe fund.
87	87	(5) "Insurer" means an insurance company, reciprocal
88	88	or interinsurance exchange, mutual insurance company, capital
89	89	stock company, county mutual insurance company, farm mutual
90	90	insurance company, Lloyd's plan, or other legal entity authorized
91	91	to write residential property insurance in this state. The term
92	92	includes an affiliate, as described by Section 823.003(a), if that
93	93	affiliate is authorized to write and is writing residential
94	94	property insurance in this state. The term also includes:
95	95	(A) an eligible surplus lines insurer regulated
96	96	under Chapter 981;
97	97	(B) the Texas Windstorm Insurance Association
98	98	under Chapter 2210; and
99	99	(C) the FAIR Plan Association under Chapter 2211.
100	100	(6) "Losses" means direct incurred losses under
101	101	covered policies, other than losses attributable to additional
102	102	living expenses coverages and loss adjustment expenses.
103	103	(7) "Retention" means the amount of losses below which
104	104	an insurer is not entitled to reimbursement from the fund.
105	105	[Sections 1809.004-1809.050 reserved for expansion]
106	106	SUBCHAPTER B. POWERS AND DUTIES OF DEPARTMENT
107	107	AND COMMISSIONER
108	108	Sec. 1809.051. RULEMAKING. (a) The commissioner shall
109	109	adopt rules in the manner prescribed by Subchapter A, Chapter 36, as
110	110	reasonable and necessary to implement this chapter.
111	111	(b) Rules adopted under Subsection (a) must:
112	112	(1) conform to the legislature's specific intent in
113	113	establishing the fund, as provided by Section 1809.002; and
114	114	(2) enhance the fund's potential ability to respond to
115	115	claims for covered events.
116	116	(c) Rules adopted under Subsection (a) must contain general
117	117	provisions to allow the rules to be applied with enough reasonable
118	118	flexibility to accommodate insurers in situations of an unusual
119	119	nature or if undue hardship may result. The flexibility authorized
120	120	under this subsection may not in any way impair, override,
121	121	supersede, or constrain the public purpose of the fund, and must be
122	122	consistent with sound insurance practices.
123	123	Sec. 1809.052. ALTERNATE REPORTING METHODS AUTHORIZED. The
124	124	department may allow insurers to use alternative methods of
125	125	reporting to comply with reporting requirements adopted under this
126	126	chapter if the commissioner determines that:
127	127	(1) use of those alternate methods does not adversely
128	128	affect proper administration of the fund; and
129	129	(2) the alternate methods produce data that is
130	130	consistent for the purposes of this chapter.
131	131	Sec. 1809.053. REPROCESSING FEE. To ensure the equitable
132	132	operation of the fund, the department may impose a reasonable fee on
133	133	an insurer to recover any costs incurred by the department in
134	134	reprocessing inaccurate, incomplete, or untimely exposure data
135	135	submitted by the insurer.
136	136	Sec. 1809.054. REINSURANCE ADVISORY COUNCIL. (a) To
137	137	provide the department with information and advice in connection
138	138	with the department's duties under this chapter, the commissioner
139	139	shall appoint a seven-member reinsurance advisory council composed
140	140	as follows:
141	141	(1) an actuary;
142	142	(2) a meteorologist;
143	143	(3) a representative of insurers;
144	144	(4) a representative of insurance agents;
145	145	(5) a representative of reinsurers; and
146	146	(6) two public members.
147	147	(b) The chair of the Senate Business and Commerce Committee
148	148	and the chair of the House Insurance Committee serve as ex officio
149	149	members of the advisory council.
150	150	(c) Appointed members of the advisory council serve at the
151	151	pleasure of the commissioner.
152	152	(d) An appointed member of the advisory council is not
153	153	entitled to compensation, but is entitled to reimbursement for
154	154	traveling expenses incurred in performing duties as a member of the
155	155	advisory council up to the limit provided by the General
156	156	Appropriations Act.
157	157	(e) The advisory council is not subject to Chapter 2110,
158	158	Government Code.
159	159	Sec. 1809.055. EFFECT OF CREATION OF FEDERAL OR MULTISTATE
160	160	PROGRAM. On the creation of a federal or multistate catastrophic
161	161	insurance or reinsurance program intended to serve purposes similar
162	162	to the purposes of the fund established under this chapter, the
163	163	department shall promptly make recommendations to the legislature
164	164	regarding:
165	165	(1) coordination with the federal or multistate
166	166	program;
167	167	(2) termination of the fund; or
168	168	(3) other actions as the commissioner determines to be
169	169	appropriate.
170	170	[Sections 1809.056-1809.100 reserved for expansion]
171	171	SUBCHAPTER C. FUND
172	172	Sec. 1809.101. ESTABLISHMENT OF FUND. (a) The Texas
173	173	natural disaster catastrophe fund is a trust fund outside the state
174	174	treasury in the custody of the comptroller. The department shall
175	175	administer the fund.
176	176	(b) Money in the fund may not be spent, loaned, or
177	177	appropriated except to pay:
178	178	(1) obligations of the fund that arise out of
179	179	reimbursement contracts entered into under Subchapter E;
180	180	(2) debts, including obligations arising out of public
181	181	securities issued under Subchapter H;
182	182	(3) costs of the mitigation program under Section
183	183	1809.103;
184	184	(4) costs of procuring reinsurance; and
185	185	(5) costs of administration of the fund.
186	186	(c) The comptroller shall invest the money in the fund in
187	187	the manner provided by law for investment of state funds. Except as
188	188	otherwise provided by this chapter, earnings from all investments
189	189	shall be retained in the fund.
190	190	(d) The department may employ staff or contract with
191	191	professionals as the commissioner considers necessary for the
192	192	administration of the fund.
193	193	Sec. 1809.102. BORROWING AUTHORIZED. In addition to using
194	194	public securities under Subchapter H, the department may borrow
195	195	from any market sources at prevailing interest rates.
196	196	Sec. 1809.103. MITIGATION PROGRAM; USE OF FUND INVESTMENT
197	197	INCOME. (a) On certification by the comptroller, an amount not to
198	198	exceed 35 percent of the investment income of the fund for the prior
199	199	fiscal year shall be transferred to the disaster preparedness and
200	200	mitigation grant council established under Section 418.075,
201	201	Government Code.
202	202	(b) Notwithstanding Subsection (a), money is not available
203	203	for transfer under this section if the comptroller determines that
204	204	a transfer of investment income from the fund would jeopardize the
205	205	actuarial soundness of the fund.
206	206	Sec. 1809.104. SEMIANNUAL STATEMENT. In May and October of
207	207	each year, the comptroller shall publish in the Texas Register a
208	208	statement of the fund's anticipated borrowing capacity and the
209	209	balance of the fund as of the date of the statement.
210	210	Sec. 1809.105. REINSURANCE. The department may procure
211	211	reinsurance from reinsurers authorized under Subtitle F, Title 4
212	212	for the purpose of maximizing the capacity of the fund.
213	213	Sec. 1809.106. REVERSION OF FUND ASSETS ON TERMINATION.
214	214	The fund and the duties of the comptroller and the department under
215	215	this chapter may be terminated only by law. On termination of the
216	216	fund, all assets of the fund shall revert to the general revenue
217	217	fund.
218	218	Sec. 1809.107. ADVANCE PREMIUM PAYMENT. (a) To provide
219	219	startup money for the administration of the fund, each insurer
220	220	shall pay to the fund an advance premium payment of $1,000. The
221	221	department shall collect the advance premium payments required by
222	222	this section for deposit in the fund. The insurer shall receive a
223	223	credit against future premiums for the advance payment.
224	224	(b) This section expires September 1, 2011.
225	225	[Sections 1809.108-1809.150 reserved for expansion]
226	226	SUBCHAPTER D. COMPUTATION OF INSURER'S RETENTION
227	227	Sec. 1809.151. COMPUTATION OF INSURER'S RETENTION. For
228	228	purposes of this chapter, an insurer's retention shall be computed
229	229	as provided by this subchapter.
230	230	Sec. 1809.152. RETENTION MULTIPLES. (a) The department
231	231	shall compute and report to each insurer the retention multiples
232	232	for each year.
233	233	(b) For the contract year beginning in 2009, the retention
234	234	multiple is equal to $2 billion, divided by the total estimated
235	235	reimbursement premium for the contract year. For subsequent years,
236	236	the retention multiple is equal to $2 billion, adjusted to reflect
237	237	the percentage growth in premium for covered policies since the
238	238	date of the initial contracts entered into under this chapter,
239	239	divided by the total estimated reimbursement premium for the
240	240	contract year.
241	241	Sec. 1809.153. INSURER ELECTION; PROVISIONAL AND ACTUAL
242	242	RETENTION. (a) The retention multiple determined under Section
243	243	1809.152(b) shall be adjusted to reflect the coverage level elected
244	244	by the insurer under Section 1809.202. For insurers electing:
245	245	(1) the 90 percent coverage level, the adjusted
246	246	retention multiple is 100 percent of the amount determined under
247	247	Section 1809.152(b);
248	248	(2) the 75 percent coverage level, the retention
249	249	multiple is 120 percent of the amount determined under Section
250	250	1809.152(b); and
251	251	(3) the 45 percent coverage level, the adjusted
252	252	retention multiple is 200 percent of the amount determined under
253	253	Section 1809.152(b).
254	254	(b) An insurer shall determine the insurer's:
255	255	(1) provisional retention by multiplying the insurer's
256	256	provisional reimbursement premium by the applicable adjusted
257	257	retention multiple; and
258	258	(2) actual retention by multiplying the insurer's
259	259	actual reimbursement premium by the applicable adjusted retention
260	260	multiple.
261	261	[Sections 1809.154-1809.200 reserved for expansion]
262	262	SUBCHAPTER E. REIMBURSEMENT CONTRACTS
263	263	Sec. 1809.201. REIMBURSEMENT CONTRACT REQUIRED. As a
264	264	condition of engaging in the business of insurance in this state,
265	265	each insurer that writes covered policies shall enter into a
266	266	contract with the department under which the department shall
267	267	provide to the insurer the reimbursement described by Section
268	268	1809.202 in exchange for the reimbursement premium paid to the fund
269	269	by the insurer under Subchapter G.
270	270	Sec. 1809.202. REIMBURSEMENT PERCENTAGES. (a) A
271	271	reimbursement contract must contain a promise by the department to
272	272	reimburse the insurer, as provided by Subsection (b), for a
273	273	percentage equal to 45 percent, 75 percent, or 90 percent of the
274	274	insurer's losses from each covered event in excess of the insurer's
275	275	retention, plus five percent of the reimbursed losses to cover loss
276	276	adjustment expenses.
277	277	(b) The insurer must elect one of the payment percentages
278	278	specified under Subsection (a). On renewal of a reimbursement
279	279	contract, the insurer may elect:
280	280	(1) a lower payment percentage, if no public
281	281	securities under Subchapter H issued after a covered event are
282	282	outstanding; or
283	283	(2) a higher payment percentage, if the insurer pays
284	284	to the fund an actuarially appropriate equalization charge as
285	285	determined by the department.
286	286	(c) All members of an insurer group must elect the same
287	287	payment percentage.
288	288	(d) A joint underwriting association or assigned risk plan
289	289	established under this code must elect the 90 percent payment
290	290	percentage.
291	291	Sec. 1809.203. EFFECT OF REINSURANCE; OTHER RECOVERIES.
292	292	(a) A reimbursement contract must provide that reimbursement
293	293	amounts may not be reduced by reinsurance paid or payable to the
294	294	insurer from other sources.
295	295	(b) Recoveries from another source, together with
296	296	reimbursements under the contract, may not exceed 100 percent of
297	297	the insurer's losses from covered events. If those recoveries and
298	298	reimbursements exceed 100 percent of the insurer's losses from
299	299	covered events, and if an agreement between the insurer and the
300	300	reinsurer to the contrary does not exist, any amount in excess of
301	301	100 percent of the insurer's losses must be deposited in the fund.
302	302	Sec. 1809.204. DEPARTMENT OBLIGATION. A reimbursement
303	303	contract must provide that the obligation of the department with
304	304	respect to all contracts covering a particular year may not exceed
305	305	the current balance of the fund, together with the maximum amount
306	306	that the department is able to raise through the issuance of public
307	307	securities under Subchapter H.
308	308	Sec. 1809.205. ANNUAL NOTIFICATION TO INSURERS. (a) A
309	309	reimbursement contract must require the department to notify each
310	310	insurer annually of:
311	311	(1) the fund's anticipated borrowing capacity for the
312	312	subsequent year;
313	313	(2) the balance of the fund as of the date of the
314	314	notification; and
315	315	(3) the insurer's estimated share of total
316	316	reimbursement to be paid to the fund.
317	317	(b) For all regulatory and reinsurance purposes, an insurer
318	318	may compute the insurer's projected payout from the fund as the
319	319	insurer's share of the total fund premium multiplied by the sum of
320	320	the fund balance and bonding capacity as reported under this
321	321	section.
322	322	Sec. 1809.206. INSURER QUARTERLY REPORTS; PAYMENT OF
323	323	REIMBURSEMENT BY DEPARTMENT. (a) The reimbursement contract shall
324	324	require each insurer to report to the department on December 31 of
325	325	each year and quarterly thereafter the insurer's losses from
326	326	covered events for the year and the quarter.
327	327	(b) The department shall determine and pay, as soon as
328	328	practicable after receiving a report under Subsection (a), the
329	329	initial amount of reimbursement due and adjustments to that amount
330	330	based on later loss information. Adjustments to reimbursement
331	331	amounts shall require the department to pay, or the insurer to
332	332	return, amounts reflecting the most recent computation of losses.
333	333	Sec. 1809.207. LOANS TO MAINTAIN INSURER SOLVENCY. (a)
334	334	Each reimbursement contract must provide that the department shall
335	335	loan to an insurer, at market interest rates, the amounts necessary
336	336	to maintain the solvency of the insurer if the insurer demonstrates
337	337	to the satisfaction of the department that:
338	338	(1) the insurer is likely to qualify for reimbursement
339	339	under the contract; and
340	340	(2) the immediate receipt of money is likely to
341	341	prevent the insurer from becoming insolvent.
342	342	(b) A loan under Subsection (a) may not exceed an amount
343	343	equal to 50 percent of the department's estimate of the
344	344	reimbursement due the insurer. The insurer's reimbursement shall
345	345	be reduced by an amount equal to the amount of the loan and interest
346	346	on the loan.
347	347	Sec. 1809.208. EFFECT OF INSURER INSOLVENCY. (a) In this
348	348	section, the "net amount of all reimbursement moneys" means the
349	349	amount remaining after reimbursement for preliminary or duplicate
350	350	payments owed to private reinsurers, or other inuring reinsurance
351	351	payments to private reinsurers, that satisfy statutory or
352	352	contractual obligations to those reinsurers of the insolvent
353	353	insurer attributable to covered events. Notwithstanding any law to
354	354	the contrary, a private reinsurer described by this subsection
355	355	shall be reimbursed or otherwise paid before any payment to the
356	356	Texas Property and Casualty Insurance Guaranty Association under
357	357	Subsection (b).
358	358	(b) Each reimbursement contract must provide that in the
359	359	event of the insolvency of an insurer, the fund shall pay the net
360	360	amount of all reimbursement moneys owed to the insurer directly to
361	361	the Texas Property and Casualty Insurance Guaranty Association for
362	362	the benefit of the insurer's policyholders in this state. The
363	363	guaranty association shall pay all claims up to the maximum amount
364	364	permitted by Chapter 462. Any remaining moneys shall be paid pro
365	365	rata to claims not fully satisfied.
366	366	[Sections 1809.209-1809.250 reserved for expansion]
367	367	SUBCHAPTER F. REIMBURSEMENT IF FUNDS INSUFFICIENT
368	368	Sec. 1809.251. REIMBURSEMENT IF FUNDS INSUFFICIENT. If the
369	369	department determines that the current balance of the fund,
370	370	together with the amount that the department determines possible to
371	371	raise through public securities issued under Subchapter H, is
372	372	insufficient to reimburse all insurers at the level promised under
373	373	the reimbursement contracts, the department shall reimburse
374	374	insurers as provided by this subchapter.
375	375	Sec. 1809.252. FIRST REIMBURSEMENT. (a) The department
376	376	shall first reimburse each insurer writing covered policies that is
377	377	determined by the department to:
378	378	(1) be in full compliance with this chapter;
379	379	(2) have surplus as to policyholders not exceeding $20
380	380	million; and
381	381	(3) write at least 25 percent of the insurer's
382	382	countrywide property insurance premium in this state.
383	383	(b) The amount of reimbursement made to an insurer under
384	384	Subsection (a) must be the lesser of:
385	385	(1) $10 million; or
386	386	(2) an amount equal to 10 times the insurer's
387	387	reimbursement premium for the current year.
388	388	(c) The amount of reimbursement paid under this section may
389	389	not exceed the full amount of reimbursement promised by the
390	390	reimbursement contract.
391	391	(d) This section does not apply to any contract year in
392	392	which the year-end projected cash balance of the fund, exclusive of
393	393	any bonding capacity of the fund, exceeds an amount set by the
394	394	commissioner in consultation with the comptroller and the Texas
395	395	Public Finance Authority.
396	396	Sec. 1809.253. SECOND REIMBURSEMENT. After reimbursements
397	397	under Section 1809.252, the department shall pay to each insurer
398	398	the amount of reimbursement owed to that insurer, up to an amount
399	399	equal to the projected payout determined under Section 1809.254.
400	400	Sec. 1809.254. PRORATED REIMBURSEMENT. After
401	401	reimbursements under Section 1809.252, the department shall
402	402	establish the prorated reimbursement level at the highest level for
403	403	which any remaining fund balance or public security proceeds are
404	404	sufficient.
405	405	[Sections 1809.255-1809.300 reserved for expansion]
406	406	SUBCHAPTER G. REIMBURSEMENT PREMIUMS
407	407	Sec. 1809.301. PREMIUM PAYMENT. Each reimbursement
408	408	contract shall require the insurer to pay to the fund annually an
409	409	actuarially indicated premium for the promised reimbursement. In
410	410	establishing the premium, the department shall consider the
411	411	coverage level elected by the insurer under Section 1809.202 and
412	412	any factors that tend to enhance the actuarial sophistication of
413	413	ratemaking for the fund, including deductibles, type of
414	414	construction, type of coverage provided, relative concentration of
415	415	risks, and other factors considered appropriate by the
416	416	commissioner.
417	417	Sec. 1809.302. FORMULA FOR PAYMENT OF PREMIUM. (a) The
418	418	department shall select an independent consultant to develop a
419	419	formula for determining the actuarially indicated premium to be
420	420	paid to the fund. The formula must specify, for each zip code or
421	421	other limited geographical area, the amount to be paid by an insurer
422	422	for each $1,000 of insured value under covered policies in that zip
423	423	code or other area.
424	424	(b) The department may, at any time, revise the formula in
425	425	the manner provided by this section.
426	426	Sec. 1809.303. INSURER NOTICE; PAYMENT. (a) Not later than
427	427	September 1 of each year, each insurer shall notify the department
428	428	of the insurer's insured values under covered policies by zip code,
429	429	as of June 30 of that year.
430	430	(b) Based on the reports received under Subsection (a), the
431	431	department shall compute the premium due from each insurer, based
432	432	on the formula adopted under Section 1809.302. The insurer shall
433	433	pay the required annual premium under a periodic payment plan as
434	434	specified in the reimbursement contract. The department shall
435	435	provide for:
436	436	(1) payment of reimbursement premium in periodic
437	437	installments; and
438	438	(2) the adjustment of provisional premium
439	439	installments collected before submission of the exposure report to
440	440	reflect data in the exposure report.
441	441	(c) All premiums paid to the fund under reimbursement
442	442	contracts shall be treated as premium for approved reinsurance for
443	443	all accounting and regulatory purposes.
444	444	Sec. 1809.304. EMERGENCY ASSESSMENT. (a) If the Texas
445	445	Public Finance Authority determines that the amount of revenue
446	446	produced under this subchapter through reimbursement premiums is
447	447	insufficient to fund any public securities issued under Subchapter
448	448	H as necessary to pay reimbursement at the levels promised in the
449	449	reimbursement contracts, the authority shall direct the department
450	450	to levy an emergency assessment on each insurer writing property
451	451	and casualty insurance in this state.
452	452	(b) Except as otherwise provided by this subsection, each
453	453	affected insurer shall pay to the fund, by July 1 of each year, an
454	454	amount equal to two percent of the insurer's gross direct written
455	455	premium for the prior year from all property and casualty insurance
456	456	written in this state. If the governor has declared a state of
457	457	emergency under Chapter 418, Government Code, because of the
458	458	occurrence of a covered event, the amount of the emergency
459	459	assessment under this subsection may be increased to an amount not
460	460	exceeding four percent of that premium.
461	461	(c) The annual assessments under this section continue
462	462	until the public securities issued with respect to which the
463	463	assessment was imposed are retired.
464	464	(d) An insurer may not be subject to more than one
465	465	assessment under this section.
466	466	(e) Any rate filing or portion of a rate filing reflecting a
467	467	rate change attributable entirely to the assessment levied under
468	468	this section shall be deemed approved when made, subject to the
469	469	authority of the commissioner to require actuarial justification as
470	470	to the adequacy of any rate at any time. If the rate filing reflects
471	471	only a rate change attributable to the assessment under this
472	472	section, the filing may consist of a certification so stating.
473	473	[Sections 1809.305-1809.350 reserved for expansion]
474	474	SUBCHAPTER H. PUBLIC SECURITIES PROGRAM
475	475	Sec. 1809.351. PURPOSE. The legislature finds that the
476	476	issuance of public securities to fund a state program to provide
477	477	reimbursement to insurers for a portion of their losses incurred as
478	478	a result of certain natural disasters will create additional
479	479	insurance capacity to benefit this state's economy and the public
480	480	health, safety, and welfare.
481	481	Sec. 1809.352. DEFINITIONS. In this subchapter:
482	482	(1) "Board" means the board of directors of the Texas
483	483	Public Finance Authority.
484	484	(2) "Public security" means a debt instrument or other
485	485	public security issued by the Texas Public Finance Authority.
486	486	(3) "Public security resolution" means the resolution
487	487	or order authorizing public securities to be issued under this
488	488	subchapter.
489	489	Sec. 1809.353. APPLICABILITY OF OTHER LAWS. (a) To the
490	490	extent consistent with this subchapter, Chapter 1232, Government
491	491	Code, applies to public securities issued under this subchapter.
492	492	In the event of a conflict, this subchapter controls.
493	493	(b) The following laws also apply to public securities
494	494	issued under this subchapter to the extent consistent with this
495	495	section:
496	496	(1) Chapters 1201, 1202, 1204, 1205, 1231, and 1371,
497	497	Government Code; and
498	498	(2) Subchapter A, Chapter 1206, Government Code.
499	499	Sec. 1809.354. ISSUANCE OF PUBLIC SECURITIES AUTHORIZED.
500	500	(a) On the occurrence of a covered event and a determination by the
501	501	comptroller that the amount in the fund will be insufficient to pay
502	502	reimbursement at the levels promised under reimbursement contracts
503	503	under this chapter, the commissioner shall request the Texas Public
504	504	Finance Authority to issue public securities for the benefit of the
505	505	fund.
506	506	(b) The Texas Public Finance Authority may issue, on behalf
507	507	of the department, public securities in an amount sufficient to
508	508	fund the obligations of the department under reimbursement
509	509	contracts entered into under this chapter as determined by the
510	510	department and approved by the commissioner after at least 10 days'
511	511	notice and a hearing if a hearing is requested by any person within
512	512	the 10-day notice period.
513	513	Sec. 1809.355. TERMS OF ISSUANCE. (a) Public securities
514	514	issued under this subchapter may be issued at a public or private
515	515	sale.
516	516	(b) Public securities must:
517	517	(1) be issued in the name of the department; and
518	518	(2) mature not more than 15 years after the date
519	519	issued.
520	520	Sec. 1809.356. CONTENTS OF PUBLIC SECURITY RESOLUTION;
521	521	ADMINISTRATION OF ACCOUNTS. (a) In a public security resolution,
522	522	the board may:
523	523	(1) provide for the flow of funds and the
524	524	establishment, maintenance, and investment of funds and special
525	525	accounts with regard to the public securities, including an
526	526	interest and sinking fund account, a reserve account, and other
527	527	accounts; and
528	528	(2) make additional covenants with respect to the
529	529	public securities and the designated income and receipts of the
530	530	association pledged to the payment of the public securities.
531	531	(b) The board shall administer the accounts in accordance
532	532	with this subchapter.
533	533	Sec. 1809.357. SOURCE OF PAYMENT. (a) Public securities
534	534	issued under this subchapter are payable only from:
535	535	(1) the reimbursement premiums collected under
536	536	Subchapter G; or
537	537	(2) any other amounts that the department is
538	538	authorized to levy, charge, and collect on behalf of the fund.
539	539	(b) The public securities are obligations solely of the
540	540	department and do not create a pledge, gift, or loan of the faith,
541	541	credit, or taxing authority of this state.
542	542	(c) Each public security must:
543	543	(1) include a statement that the state is not
544	544	obligated to pay any amount on the security and that the faith,
545	545	credit, or taxing authority of this state are not pledged, given, or
546	546	lent to those payments; and
547	547	(2) state on the security's face that the security:
548	548	(A) is payable solely from the revenue pledged
549	549	for that purpose; and
550	550	(B) is not and may not constitute a legal or moral
551	551	obligation of the state.
552	552	Sec. 1809.358. PAYMENT OF INTEREST. Interest on the public
553	553	securities issued under this subchapter shall be paid from the
554	554	reimbursement premiums collected under Subchapter G.
555	555	Sec. 1809.359. EXEMPTION FROM TAXATION. Public securities
556	556	issued under this subchapter, any interest from those public
557	557	securities, and all assets pledged to secure the payment of the
558	558	public securities are free from taxation by the state or a political
559	559	subdivision of this state.
560	560	Sec. 1809.360. AUTHORIZED INVESTMENTS. Public securities
561	561	issued under this subchapter are authorized investments under
562	562	Subchapter B, Chapter 424, and Subchapters C and D, Chapter 425.
563	563	Sec. 1809.361. STATE PLEDGE REGARDING PUBLIC SECURITY OWNER
564	564	RIGHTS AND REMEDIES. (a) The state pledges to and agrees with the
565	565	owners of public securities issued in accordance with this
566	566	subchapter that the state will not limit or alter the rights vested
567	567	in the department to fulfill the terms of agreements made with the
568	568	owners or in any way impair the rights and remedies of those owners
569	569	until the following obligations are fully discharged:
570	570	(1) the public securities;
571	571	(2) any bond premium;
572	572	(3) interest; and
573	573	(4) all costs and expenses related to an action or
574	574	proceeding by or on behalf of the owners.
575	575	(b) The department may include the state's pledge and
576	576	agreement under Subsection (a) in an agreement with the owners of
577	577	the public securities.
578	578	Sec. 1809.362. PAYMENT ENFORCEABLE BY MANDAMUS. A writ of
579	579	mandamus and any other legal or equitable remedy are available to a
580	580	party in interest to require the department or another party to
581	581	fulfill an agreement or perform a function or duty under:
582	582	(1) this subchapter;
583	583	(2) the Texas Constitution; or
584	584	(3) a public security resolution.
585	585	[Sections 1809.363-1809.400 reserved for expansion]
586	586	SUBCHAPTER I. ENFORCEMENT
587	587	Sec. 1809.401. SANCTIONS. An insurer that violates this
588	588	chapter or a rule adopted under this chapter is subject to sanctions
589	589	under Chapter 82.
590	590	SECTION 2. Subchapter D, Chapter 418, Government Code, is
591	591	amended by adding Section 418.075 to read as follows:
592	592	Sec. 418.075. DISASTER PREPAREDNESS AND MITIGATION GRANT
593	593	COUNCIL. (a) In this section:
594	594	(1) "Council" means the disaster preparedness and
595	595	mitigation grant council.
596	596	(2) "Covered event" has the meaning assigned by
597	597	Section 1809.003, Insurance Code.
598	598	(b) The disaster preparedness and mitigation grant council
599	599	is composed of:
600	600	(1) the following ex officio members:
601	601	(A) the executive commissioner of the Health and
602	602	Human Services Commission or that person's designee; and
603	603	(B) the director of the division or that person's
604	604	designee; and
605	605	(2) the following members appointed by the governor to
606	606	serve a two-year term:
607	607	(A) an engineer;
608	608	(B) two representatives of law enforcement;
609	609	(C) a public member;
610	610	(D) a representative of insurers; and
611	611	(E) two representatives of firefighters.
612	612	(c) The lieutenant governor shall designate two members of
613	613	the senate and the speaker of the house of representatives shall
614	614	designate two members of the house of representatives to advise the
615	615	council.
616	616	(d) The governor shall designate the presiding officer of
617	617	the council.
618	618	(e) A council member appointed under Subsection (b)(2) is
619	619	not entitled to compensation, but is entitled to reimbursement for
620	620	traveling expenses incurred in performing duties as a member of the
621	621	council up to the limit provided by the General Appropriations Act.
622	622	(f) Appointments to the council shall be made without regard
623	623	to the race, color, disability, sex, religion, age, or national
624	624	origin of the appointees.
625	625	(g) The division may use funds received under Section
626	626	1809.103, Insurance Code, to provide grant funding for local
627	627	governments, state agencies, public and private educational
628	628	institutions, and nonprofit organizations to support programs
629	629	intended to:
630	630	(1) improve natural disaster preparedness;
631	631	(2) reduce potential losses from covered events;
632	632	(3) provide research into means to reduce those
633	633	losses;
634	634	(4) educate or inform the public as to means to reduce
635	635	losses from covered events;
636	636	(5) assist the public in determining the
637	637	appropriateness of particular upgrades to structures or in the
638	638	financing of those upgrades; or
639	639	(6) protect local infrastructure from potential
640	640	damage from a covered event.
641	641	(h) The division may award money under Subsection (g) only
642	642	with the express written prior approval of the council. The council
643	643	shall consult with the advisors appointed under Subsection (c)
644	644	before approving a proposed grant.
645	645	SECTION 3. The commissioner of insurance shall appoint the
646	646	advisory council established under Section 1809.054, Insurance
647	647	Code, as added by this Act, not later than the 30th day after the
648	648	effective date of this Act.
649	649	SECTION 4. The disaster preparedness and mitigation grant
650	650	council established under Section 418.075, Government Code, as
651	651	added by this Act, shall be established as provided by that section
652	652	not later than the 60th day after the effective date of this Act.
653	653	SECTION 5. The commissioner of insurance shall adopt the
654	654	initial contract forms required under Chapter 1809, Insurance Code,
655	655	as added by this Act, not later than the 30th day after the
656	656	effective date of this Act, and shall adopt the initial premium
657	657	formula not later than the 60th day after the effective date of this
658	658	Act.
659	659	SECTION 6. The Texas Department of Insurance shall enter
660	660	into reimbursement contracts with insurers under Chapter 1809,
661	661	Insurance Code, as added by this Act, not later than the 90th day
662	662	after the effective date of this Act.
663	663	SECTION 7. (a) Except as provided by Subsection (b), an
664	664	insurer is not required to comply with Chapter 1809, Insurance
665	665	Code, until the 90th day after the effective date of this Act.
666	666	(b) An insurer shall pay the advance premium payment
667	667	required under Section 1809.107, Insurance Code, as added by this
668	668	Act, not later than the 60th day after the effective date of this
669	669	Act.
670	670	SECTION 8. Not later than the 120th day after the effective
671	671	date of this Act, the disaster preparedness and mitigation grant
672	672	council established under Section 418.075, Government Code, as
673	673	added by this Act, shall establish the grant program described by
674	674	that section.
675	675	SECTION 9. This Act takes effect immediately if it receives
676	676	a vote of two-thirds of all the members elected to each house, as
677	677	provided by Section 39, Article III, Texas Constitution. If this
678	678	Act does not receive the vote necessary for immediate effect, this
679	679	Act takes effect September 1, 2009.