Texas 2009 - 81st Regular

Texas House Bill HB3853 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	81R4967 PB-D
2	2	By: Eiland H.B. No. 3853
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to the operation of the Texas Windstorm Insurance
8	8	Association.
9	9	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	10	SECTION 1. Section 2210.005, Insurance Code, is amended to
11	11	read as follows:
12	12	Sec. 2210.005. DESIGNATION AS CATASTROPHE AREA OR
13	13	INADEQUATE FIRE INSURANCE AREA; REVOCATION OF DESIGNATION. (a)
14	14	After at least 10 days' notice and a hearing, if a hearing is
15	15	requested by any person within the 10-day notice period, the
16	16	commissioner may designate an area of this state as a catastrophe
17	17	area if the commissioner determines that windstorm and hail
18	18	insurance is not reasonably available to a substantial number of
19	19	the owners of insurable property located in that territory because
20	20	the territory is subject to unusually frequent and severe damage
21	21	resulting from windstorms or hailstorms.
22	22	(b) After at least 10 days' notice and a hearing, if a
23	23	hearing is requested by any person within the 10-day notice period,
24	24	the commissioner may designate an area of this state as an
25	25	inadequate fire insurance area if the commissioner determines that
26	26	fire and explosion insurance is not reasonably available to a
27	27	substantial number of owners of insurable property located in that
28	28	area.
29	29	(c) The commissioner shall revoke a designation made under
30	30	Subsection (a) or (b) if the commissioner determines, after at
31	31	least 10 days' notice and a hearing, if a hearing is requested by
32	32	any person within the 10-day notice period, that the applicable
33	33	insurance coverage is no longer reasonably unavailable to a
34	34	substantial number of owners of insurable property within the
35	35	designated territory.
36	36	(d) If the association determines that windstorm and hail
37	37	insurance or fire and explosion insurance is no longer reasonably
38	38	unavailable to a substantial number of owners of insurable property
39	39	in a territory designated as a catastrophe area or inadequate fire
40	40	insurance area, as applicable, the association may request in
41	41	writing that the commissioner revoke the designation. After at
42	42	least 10 days' notice and a hearing, if a hearing is requested by
43	43	any person within the 10-day notice period, but not later than the
44	44	30th day after the date of the hearing or the expiration of the
45	45	notice period if a hearing is not requested, the commissioner
46	46	shall:
47	47	(1) approve the request and revoke the designation;
48	48	or
49	49	(2) reject the request.
50	50	SECTION 2. Section 2210.008, Insurance Code, is amended to
51	51	read as follows:
52	52	Sec. 2210.008. DEPARTMENT ORDERS. (a) After notice and an
53	53	opportunity for a hearing as provided by Subsection (b), the
54	54	commissioner may issue any orders that the commissioner considers
55	55	necessary to implement this chapter [, including orders] regarding
56	56	maximum rates, competitive rates, and policy forms.
57	57	(b) Before the commissioner adopts an order under
58	58	Subsection (a), the department shall post notice of the [hearing on
59	59	the] order at the secretary of state's office in Austin and shall
60	60	hold a hearing to consider the proposed order if a hearing is
61	61	requested by any person not later than the 10th day after the date
62	62	on which the notice is posted. Any person may appear at such a [the]
63	63	hearing and testify for or against the adoption of the order.
64	64	SECTION 3. Sections 2210.052(a) and (d), Insurance Code,
65	65	are amended to read as follows:
66	66	(a) Each member of the association shall participate in the
67	67	assessments [writings, expenses, profits, and losses] of the
68	68	association in the proportion that the net direct premiums of that
69	69	member during the preceding calendar year bears to the aggregate
70	70	net direct premiums by all members of the association, as
71	71	determined using the information provided under Subsection (b).
72	72	(d) Notwithstanding Subsection (a), a member, in accordance
73	73	with the plan of operation, is entitled to receive credit for
74	74	similar insurance voluntarily written in an area designated by the
75	75	commissioner. The member's participation in the assessments
76	76	[writings] of the association shall be reduced in accordance with
77	77	the plan of operation.
78	78	SECTION 4. Section 2210.056(c), Insurance Code, is amended
79	79	to read as follows:
80	80	(c) On dissolution of the association, all assets of the
81	81	association revert to this state and shall be deposited in the
82	82	general revenue fund.
83	83	SECTION 5. Section 2210.058, Insurance Code, is amended to
84	84	read as follows:
85	85	Sec. 2210.058. PAYMENT OF EXCESS LOSSES[; PREMIUM TAX
86	86	CREDIT]. (a) If[, in any calendar year,] an occurrence or series
87	87	of occurrences, as defined in the plan of operation, in a
88	88	catastrophe area results in insured losses and operating expenses
89	89	of the association in excess of premium and other revenue of the
90	90	association, the excess losses shall be paid as provided by this
91	91	section.
92	92	(b) An amount not to exceed [follows:
93	93	[(1)] $100 million for each occurrence shall be
94	94	assessed against the members of the association and the Texas FAIR
95	95	Plan Association. The loss allocable to the Texas FAIR Plan
96	96	Association shall be based on the proportion that the net direct
97	97	premiums written by the Texas FAIR Plan Association during the
98	98	preceding calendar year bears to the total net direct premiums
99	99	written in this state by all members of the association for the same
100	100	period, as determined under Section 2210.052. The remainder of the
101	101	assessments shall be allocated to each member insurer in the manner
102	102	used to determine each insurer's participation in the association
103	103	for the year under Section 2210.052. Assessments made under this
104	104	subsection are not reimbursable under Subsection (g).
105	105	(c) For each occurrence, any [as provided by Subsection (b);
106	106	[(2)] losses in excess of $100 million shall be paid as
107	107	provided by this subsection from the catastrophe reserve trust fund
108	108	established under Subchapter J. Not more than 50 percent of the
109	109	amount in the catastrophe reserve trust fund as of the date of the
110	110	occurrence, reduced by anticipated payments from prior
111	111	occurrences, may be used to pay losses under this subsection unless
112	112	the commissioner determines that a greater percentage should be
113	113	applied after at least 10 days' notice and a hearing, if a hearing
114	114	is requested by any person within the 10-day notice period.
115	115	(d) Any [and any reinsurance program established by the
116	116	association;
117	117	[(3) for] losses in excess of the amounts determined
118	118	under Subsections (b) and (c) [those paid under Subdivisions (1)
119	119	and (2), an additional $200 million] shall be paid in accordance
120	120	with a plan developed by the association and approved by the
121	121	commissioner after at least 10 days' notice and a hearing if a
122	122	hearing is requested by any person within the 10-day notice period,
123	123	from any or a combination of the following sources:
124	124	(1) additional assessments to the members of the
125	125	association and the Texas FAIR Plan Association, not to exceed $300
126	126	million per calendar year, which shall be based on the proportion of
127	127	the member's or the Texas FAIR Plan Association's net direct
128	128	premiums for the lines of insurance used to compute member
129	129	participation in the association's assessments under Section
130	130	2210.052 as reported in the association's annual statement filed
131	131	with the department for the calendar year immediately preceding the
132	132	year in which the assessment is made, to the total reported net
133	133	direct premiums for those insurance lines in this state;
134	134	(2) any reinsurance proceeds recoverable by the
135	135	association; and
136	136	(3) any proceeds from public securities received by
137	137	the association under Subchapter M.
138	138	(e) Any [assessed against the members of the association, as
139	139	provided by Subsection (b); and
140	140	[(4)] losses of the association that are not [in
141	141	excess of those] paid by assessments and the catastrophe reserve
142	142	trust fund as provided by Subsections (b) and (c) or are not paid by
143	143	the plan approved by the commissioner under Subsection (d)
144	144	[Subdivisions (1), (2), and (3)] shall be paid from the proceeds
145	145	from public securities received by the association under Subchapter
146	146	M [assessed against members of the association, as provided by
147	147	Subsection (b)].
148	148	(f) Assessments under Subsection (d)(1) are reimbursable in
149	149	accordance with Subsection (g) [(b) The proportion of the losses
150	150	allocable to each insurer under Subsections (a)(1), (3), and (4)
151	151	shall be determined in the manner used to determine each insurer's
152	152	participation in the association for the year under Section
153	153	2210.052].
154	154	(g) [(c)] An insurer, including the Texas FAIR Plan
155	155	Association, that has been assessed and has paid the assessments
156	156	under Subsection (d)(1) may charge a premium surcharge for
157	157	reimbursement of the assessment. The premium surcharge must be a
158	158	charge separate from and in addition to premiums collected. The
159	159	premium surcharge applies to each insurance policy for the lines
160	160	used to compute the assessment issued by the insurer or the Texas
161	161	FAIR Plan Association in this state, the effective date of which is
162	162	within the five-year period beginning on the 90th day after the date
163	163	of the assessment. The amount of the surcharge shall be computed on
164	164	the basis of a uniform percentage of the premium on those policies,
165	165	not to exceed 20 percent per year, of the amount of the assessment,
166	166	such that over the five-year period the aggregate of all surcharges
167	167	by the insurer or the Texas FAIR Plan Association equals but does
168	168	not exceed the amount of the assessment. The amount of an
169	169	assessment paid and recoverable under this subsection [may credit
170	170	an amount paid in accordance with Subsection (a)(4) in a calendar
171	171	year against the insurer's premium tax under Chapter 221. The tax
172	172	credit authorized under this subsection shall be allowed at a rate
173	173	not to exceed 20 percent per year for five or more successive years
174	174	beginning the calendar year that the assessments under this section
175	175	are paid. The balance of payments made by the insurer and not
176	176	claimed as a premium tax credit] may be reflected in the books and
177	177	records of the insurer or the Texas FAIR Plan Association as an
178	178	admitted asset of the insurer for all purposes, including
179	179	exhibition in an annual statement under Section 862.001.
180	180	(h) If losses are paid by the procedures under Subsection
181	181	(d)(1), the association shall develop and implement a plan for
182	182	collection of a premium surcharge from policyholders of the
183	183	association. The premium surcharge must be a charge separate from
184	184	and in addition to premiums collected. The association shall
185	185	establish the premium surcharge in an amount at least 100 percent
186	186	and not more than 150 percent of the average per-policy surcharge
187	187	percentage established under Subsection (g) on any policy issued or
188	188	renewed by the association. The period for collection of the
189	189	premium surcharge under this subsection may not exceed five years.
190	190	Each surcharge collected under this subsection shall be deposited
191	191	in the catastrophe reserve trust fund.
192	192	(i) In addition to the funding described by Subsections
193	193	(b)-(h), the association may also borrow from, or enter into other
194	194	financing arrangements with, any market sources at prevailing
195	195	interest rates.
196	196	(j) The commissioner may adopt rules as necessary to
197	197	implement this section.
198	198	SECTION 6. Section 2210.059, Insurance Code, is amended to
199	199	read as follows:
200	200	Sec. 2210.059. NOTIFICATION REGARDING CERTAIN LOSSES [TAX
201	201	CREDITS]. (a) The association shall immediately notify the
202	202	department if an occurrence or series of occurrences in a
203	203	catastrophe area results in insured losses that result in
204	204	assessments, payments from the trust fund established under Section
205	205	2210.452, or claims under a reinsurance contract approved under
206	206	Section 2210.453 [a tax credit under Section 2210.058(c) in a
207	207	calendar year].
208	208	(b) On receipt of notice under Subsection (a), the
209	209	department shall immediately notify the governor and the
210	210	appropriate committees of each house of the legislature of the
211	211	amount of insured losses eligible for payments using assessment
212	212	funds, catastrophe reserve trust funds, or reinsurance proceeds
213	213	[tax credits under Section 2210.058(c)].
214	214	SECTION 7. Section 2210.060(c), Insurance Code, is amended
215	215	to read as follows:
216	216	(c) Subsection (a) does not authorize the association to
217	217	indemnify a member of the association for participating in the
218	218	assessments made by [writings, expenses, profits, and losses of]
219	219	the association in the manner provided by this chapter.
220	220	SECTION 8. Section 2210.102, Insurance Code, is amended by
221	221	amending Subsection (a) and adding Subsection (c) to read as
222	222	follows:
223	223	(a) The board of directors is composed of the following 11
224	224	[nine] members appointed by the commissioner:
225	225	(1) five members who represent the interests of
226	226	[representatives of different] insurers who are members of the
227	227	association[, elected by the members as provided by the plan of
228	228	operation];
229	229	(2) four members who represent the interests of the
230	230	[two] public, [representatives] who are nominated by the office of
231	231	public insurance counsel, and who, as of the date of the
232	232	appointment:
233	233	(A) reside in a catastrophe area; and
234	234	(B) are policyholders of the association; and
235	235	(3) two members who are property and casualty agents,
236	236	each of whom must:
237	237	(A) have demonstrated experience in the
238	238	association;
239	239	(B) maintain the agent's principal office, as of
240	240	the date of the appointment, in a catastrophe area; and
241	241	(C) hold a license under Chapter 4051 as a
242	242	general property and casualty agent or a personal lines property
243	243	and casualty agent.
244	244	(c) To be eligible to serve on the board of directors as a
245	245	representative of insurers, a person must be a full-time employee
246	246	of an authorized insurer that is a member of the association.
247	247	SECTION 9. Section 2210.103, Insurance Code, is amended by
248	248	amending Subsection (a) and adding Subsection (c) to read as
249	249	follows:
250	250	(a) Members of the board of directors serve three-year
251	251	staggered terms, with the terms of three or four members expiring on
252	252	the third Tuesday of March of each year.
253	253	(c) A member of the board of directors serves at the
254	254	pleasure of the commissioner. The commissioner shall appoint a
255	255	replacement for a member who leaves or is removed from the board of
256	256	directors in the manner provided by Section 2210.102.
257	257	SECTION 10. Subchapter C, Chapter 2210, Insurance Code, is
258	258	amended by adding Section 2210.1051 to read as follows:
259	259	Sec. 2210.1051. MEETINGS OF BOARD OF DIRECTORS. (a)
260	260	Notwithstanding Chapter 551, Government Code, or any other law,
261	261	members of the board of directors may meet by telephone conference
262	262	call, videoconference, or other similar telecommunication method.
263	263	The board may use telephone conference call, videoconference, or
264	264	other similar telecommunication method for purposes of
265	265	establishing a quorum or voting or for any other meeting purpose in
266	266	accordance with this subsection and Subsection (b). This
267	267	subsection applies without regard to the subject matter discussed
268	268	or considered by the members of the board at the meeting.
269	269	(b) A meeting held by telephone conference call,
270	270	videoconference, or other similar telecommunication method:
271	271	(1) is subject to the notice requirements applicable
272	272	to other meetings of the board of directors;
273	273	(2) may not be held unless notice of the meeting
274	274	specifies the location of the meeting;
275	275	(3) must be audible to the public at the location
276	276	specified in the notice under Subdivision (2); and
277	277	(4) must provide two-way audio communication between
278	278	all members of the board attending the meeting during the entire
279	279	meeting, and if the two-way audio communication link with members
280	280	attending the meeting is disrupted so that a quorum of the board is
281	281	no longer participating in the meeting, the meeting may not
282	282	continue until the two-way audio communication link is
283	283	reestablished.
284	284	SECTION 11. Section 2210.152, Insurance Code, is amended by
285	285	adding Subsection (c) to read as follows:
286	286	(c) The plan of operation may contain provisions allowing
287	287	the association to change its methods and procedures for doing
288	288	business in ways that allow the association to implement new
289	289	technologies designed to make the association up to date and
290	290	efficient in its operations.
291	291	SECTION 12. Section 2210.153(a), Insurance Code, is amended
292	292	to read as follows:
293	293	(a) The association may present a recommendation for a
294	294	change in the plan of operation to the department [at:
295	295	[(1) periodic hearings conducted by the department for
296	296	that purpose; or
297	297	[(2) hearings relating to property and casualty
298	298	insurance rates].
299	299	SECTION 13. Section 2210.202(b), Insurance Code, is amended
300	300	to read as follows:
301	301	(b) A general property and casualty agent or a personal
302	302	lines property and casualty agent must submit an application for
303	303	the insurance coverage on behalf of the applicant on forms
304	304	prescribed by the association. [The application must contain a
305	305	statement as to whether the applicant has submitted or will submit
306	306	the premium in full from personal funds or, if not, to whom a
307	307	balance is or will be due.]
308	308	SECTION 14. Section 2210.207(e), Insurance Code, is amended
309	309	to read as follows:
310	310	(e) Notwithstanding this chapter or any other law, the
311	311	commissioner[, after notice and hearing,] may adopt rules to:
312	312	(1) authorize the association to provide actual cash
313	313	value coverage instead of replacement cost coverage on the roof
314	314	covering of a building insured by the association; and
315	315	(2) establish:
316	316	(A) the conditions under which the association
317	317	may provide that actual cash value coverage;
318	318	(B) the appropriate premium reductions when
319	319	coverage for the roof covering is provided on an actual cash value
320	320	basis; and
321	321	(C) the disclosure that must be provided to the
322	322	policyholder, prominently displayed on the face of the windstorm
323	323	and hail insurance policy.
324	324	SECTION 15. Sections 2210.256(a), (b), (d), and (f),
325	325	Insurance Code, are amended to read as follows:
326	326	(a) After notice and an opportunity for a hearing, the
327	327	department may revoke an appointment made under Section 2210.254 if
328	328	the appointee is found to be in violation of this subchapter or a
329	329	rule of the commissioner adopted under this subchapter.
330	330	(b) The commissioner, instead of revocation, may impose
331	331	sanctions and penalties under Chapter 82, including one or more of
332	332	the following sanctions if the commissioner determines from the
333	333	facts that the sanction would be fair, reasonable, or equitable:
334	334	(1) suspension of the appointment for a specific
335	335	period, not to exceed one year;
336	336	(2) issuance of an order directing the appointee to
337	337	cease and desist from the specified activity or failure to act
338	338	determined to be in violation of this subchapter or rules of the
339	339	commissioner adopted under this subchapter; or
340	340	(3) if the commissioner finds that the appointee
341	341	knowingly, wilfully, fraudulently, or with gross negligence failed
342	342	to file the required inspection reports, or signed or caused to be
343	343	prepared an inspection report that contains a false or fraudulent
344	344	statement, issuance of an order directing the appointee to pay
345	345	within a specified time, not to exceed 60 days, a fine not to exceed
346	346	$5,000 for the violation.
347	347	(d) If it is found [after a hearing] that an appointee has
348	348	failed to comply with an order issued under Subsection (b), the
349	349	department shall, unless the order is stayed, revoke the
350	350	appointment of the person.
351	351	(f) If an appointee is an engineer licensed by the Texas
352	352	Board of Professional Engineers who is found by the department to
353	353	have knowingly, wilfully, fraudulently, or with gross negligence
354	354	failed to file the required inspection reports, or signed or caused
355	355	to be prepared an inspection report that contains a false or
356	356	fraudulent statement, the commissioner may take action against the
357	357	appointee in the manner provided by Subsections (a) and (b) but may
358	358	not assess a fine against the appointee. The commissioner shall
359	359	notify the Texas Board of Professional Engineers of an order issued
360	360	by the commissioner against an appointee who is an engineer
361	361	licensed by that board, including an order suspending or revoking
362	362	the appointment of the person.
363	363	SECTION 16. Section 2210.307(h), Insurance Code, is amended
364	364	to read as follows:
365	365	(h) The advisory committee shall submit to the commissioner
366	366	the committee's recommendation on each proposal. The commissioner
367	367	shall notify the advisory committee of the acceptance or rejection
368	368	of each recommendation not later than the 30th day after the date of
369	369	receipt by the commissioner. Acceptance of a recommendation by the
370	370	commissioner means that the commissioner will consider adoption of
371	371	that recommendation at a rulemaking proceeding [hearing]. Before
372	372	adopting a recommendation, the commissioner must determine that the
373	373	proposal, if adopted, will not weaken the integrity or diminish the
374	374	effectiveness of a procedure.
375	375	SECTION 17. Section 2210.351(d), Insurance Code, is amended
376	376	to read as follows:
377	377	(d) If at any time the commissioner determines that a filing
378	378	approved under Subsection (c) no longer meets the requirements of
379	379	this chapter, the commissioner may, after [a hearing held on] at
380	380	least 10 days' notice and a hearing, if a hearing is requested by
381	381	any person within the 10-day notice period [20 days' notice to the
382	382	association that specifies the matters to be considered at the
383	383	hearing], issue an order withdrawing approval of the filing. The
384	384	order must specify in what respects the commissioner determines
385	385	that the filing no longer meets the requirements of this chapter.
386	386	An order issued under this subsection may not take effect before the
387	387	30th day after the date of issuance of the order.
388	388	SECTION 18. Sections 2210.352(a) and (c), Insurance Code,
389	389	are amended to read as follows:
390	390	(a) Not later than August 15 of each year, the association
391	391	shall file with the department for approval by the commissioner a
392	392	proposed manual rate for all types and classes of risks written by
393	393	the association. [Chapter 40 does not apply to:
394	394	[(1) a filing made under this subsection; or
395	395	[(2) a department action with respect to the filing.]
396	396	(c) On request, the [The] commissioner shall schedule an
397	397	open meeting not later than the 45th day after the date the
398	398	department receives a filing at which interested persons may
399	399	present written or oral comments relating to the filing.
400	400	SECTION 19. Section 2210.355(b), Insurance Code, is amended
401	401	to read as follows:
402	402	(b) In adopting rates under this chapter, the following must
403	403	be considered:
404	404	(1) the past and prospective loss experience within
405	405	and outside this state of hazards for which insurance is made
406	406	available through the plan of operation, if any;
407	407	(2) recognized catastrophe models;
408	408	(3) expenses of operation, including acquisition
409	409	costs;
410	410	(4) [(3)] a reasonable margin for profit and
411	411	contingencies; and
412	412	(5) [(4)] all other relevant factors, within and
413	413	outside this state.
414	414	SECTION 20. Section 2210.356(b), Insurance Code, is amended
415	415	to read as follows:
416	416	(b) The catastrophe element used to develop rates under this
417	417	subchapter applicable to risks written by the association must be
418	418	uniform throughout the seacoast territory. The catastrophe element
419	419	of the rates must be developed using:
420	420	(1) 90 percent of both the monoline extended coverage
421	421	loss experience and related premium income for all insurers, other
422	422	than the association, for covered property located in the seacoast
423	423	territory, using not less than the most recent 30 years of
424	424	experience available; [and]
425	425	(2) 100 percent of both the loss experience and
426	426	related premium income for the association for covered property,
427	427	using not less than the most recent 30 years of experience
428	428	available; and
429	429	(3) recognized catastrophe models and any other
430	430	relevant factors as identified under Section 2210.355(b).
431	431	SECTION 21. Section 2210.359(b), Insurance Code, is amended
432	432	to read as follows:
433	433	(b) The commissioner may[, after notice and hearing,]
434	434	suspend this section on a finding that a catastrophe loss or series
435	435	of occurrences resulting in losses in the catastrophe area justify
436	436	a need to ensure:
437	437	(1) rate adequacy in the catastrophe area; and
438	438	(2) availability of insurance outside the catastrophe
439	439	area.
440	440	SECTION 22. Section 2210.361(b), Insurance Code, is amended
441	441	to read as follows:
442	442	(b) After notice and hearing, if a hearing is requested by
443	443	any person not later than the 10th day after the date on which the
444	444	notice is posted, the commissioner may accept, modify, or reject a
445	445	recommendation made by the association under this section. Chapter
446	446	40 does not apply to an action taken under this section.
447	447	SECTION 23. Sections 2210.452(a), (c), and (d), Insurance
448	448	Code, are amended to read as follows:
449	449	(a) The commissioner shall adopt rules under which the
450	450	association relinquishes its [members relinquish their] net equity
451	451	on an annual basis as provided by those rules by making payments to
452	452	the catastrophe reserve trust fund. The trust fund may be used only
453	453	to fund:
454	454	(1) the obligations of the trust fund under Section
455	455	2210.058 [2210.058(a)]; and
456	456	(2) the mitigation and preparedness plan established
457	457	under Section 2210.454 to reduce the potential for payments by
458	458	association members [that give rise to tax credits in the event of
459	459	loss].
460	460	(c) At the end of each calendar year or policy year, the
461	461	association shall pay the net gain from operations [equity] of the
462	462	association [a member], including all premium and other revenue of
463	463	the association in excess of incurred losses and operating
464	464	expenses, to the trust fund or a reinsurance program approved by the
465	465	commissioner. For the purposes of this subsection, "operating
466	466	expenses" includes the cost of any reinsurance.
467	467	(d) The commissioner by rule shall establish the procedure
468	468	relating to the disbursement of money from the trust fund [to
469	469	policyholders in the event of an occurrence or series of
470	470	occurrences within a catastrophe area that results in a
471	471	disbursement under Section 2210.058(a)]. The rules may provide
472	472	that money from the trust fund may be used to purchase reinsurance
473	473	to protect the trust fund or to reimburse the association for the
474	474	payment of policyholder claims. Any reinsurance purchases under
475	475	this subsection must be included in the reinsurance approved under
476	476	Section 2210.453.
477	477	SECTION 24. Section 2210.453, Insurance Code, is amended to
478	478	read as follows:
479	479	Sec. 2210.453. REINSURANCE PROGRAM. (a) The association may
480	480	[shall]:
481	481	(1) make payments into the trust fund; and [or]
482	482	(2) purchase [establish a] reinsurance as part of the
483	483	association's annual operating expenses to the extent [program]
484	484	approved by the department.
485	485	(b) With the approval of the department, the association may
486	486	use [establish a] reinsurance [program] that operates in addition
487	487	to or in concert with the trust fund and with assessments authorized
488	488	by this chapter.
489	489	SECTION 25. Section 2210.504(a), Insurance Code, is amended
490	490	to read as follows:
491	491	(a) Not later than the 60th day after the date of receipt of
492	492	a filing under Section 2210.503, [and after notice and hearing,]
493	493	the commissioner by order shall approve, disapprove, or modify the
494	494	proposed adjustment to the maximum liability limits.
495	495	SECTION 26. Chapter 2210, Insurance Code, is amended by
496	496	adding Subchapter M to read as follows:
497	497	SUBCHAPTER M. PUBLIC SECURITIES PROGRAM
498	498	Sec. 2210.601. PURPOSE. The legislature finds that issuing
499	499	public securities to provide a method to raise funds to provide
500	500	windstorm, hail, and fire insurance through the association in
501	501	certain designated areas of the state is to benefit the public and
502	502	to further a public purpose.
503	503	Sec. 2210.602. DEFINITIONS. In this subchapter:
504	504	(1) "Board" means the board of directors of the Texas
505	505	Public Finance Authority.
506	506	(2) "Insurer" means each property and casualty insurer
507	507	authorized to engage in the business of property and casualty
508	508	insurance in this state. The term specifically includes a county
509	509	mutual insurance company, a Lloyd's plan, and a reciprocal or
510	510	interinsurance exchange. The term does not include a county mutual
511	511	insurance company described by Section 912.310.
512	512	(3) "Public security" means a debt instrument or other
513	513	public security issued by the Texas Public Finance Authority.
514	514	(4) "Public security resolution" means the resolution
515	515	or order authorizing public securities to be issued under this
516	516	subchapter.
517	517	Sec. 2210.603. APPLICABILITY OF OTHER LAWS. (a) To the
518	518	extent consistent with this subchapter, Chapter 1232, Government
519	519	Code, applies to public securities issued under this subchapter.
520	520	In the event of a conflict, this subchapter controls.
521	521	(b) The following laws also apply to public securities
522	522	issued under this subchapter to the extent consistent with this
523	523	subchapter:
524	524	(1) Chapters 1201, 1202, 1204, 1205, 1231, and 1371,
525	525	Government Code; and
526	526	(2) Subchapter A, Chapter 1206, Government Code.
527	527	Sec. 2210.604. ISSUANCE OF PUBLIC SECURITIES AUTHORIZED.
528	528	(a) At the request of the association and with the approval of the
529	529	commissioner, the Texas Public Finance Authority shall issue public
530	530	securities to:
531	531	(1) fund the association, including funding necessary
532	532	to:
533	533	(A) establish and maintain reserves to pay
534	534	claims;
535	535	(B) pay incurred claims;
536	536	(C) pay operating expenses; and
537	537	(D) purchase reinsurance;
538	538	(2) pay costs related to issuance of the public
539	539	securities; and
540	540	(3) pay other costs related to the public securities
541	541	as may be determined by the board.
542	542	(b) The Texas Public Finance Authority may issue, on behalf
543	543	of the association, public securities in an amount sufficient to
544	544	fund the insured losses and operating expenses of the association
545	545	as determined by the association and approved by the commissioner
546	546	after at least 10 days' notice and a hearing if a hearing is
547	547	requested by any person within the 10-day notice period.
548	548	Sec. 2210.605. TERMS OF ISSUANCE. (a) Public securities
549	549	issued under this subchapter may be issued at a public or private
550	550	sale.
551	551	(b) Public securities must:
552	552	(1) be issued in the name of the association; and
553	553	(2) mature not more than 10 years after the date
554	554	issued.
555	555	Sec. 2210.606. CONTENTS OF PUBLIC SECURITY RESOLUTION;
556	556	ADMINISTRATION OF ACCOUNTS. (a) In a public security resolution,
557	557	the board may:
558	558	(1) provide for the flow of funds and the
559	559	establishment, maintenance, and investment of funds and special
560	560	accounts with regard to the public securities, including an
561	561	interest and sinking fund account, a reserve account, and other
562	562	accounts; and
563	563	(2) make additional covenants with respect to the
564	564	public securities and the designated income and receipts of the
565	565	association pledged to the payment of the public securities.
566	566	(b) The association shall administer the accounts in
567	567	accordance with this subchapter.
568	568	Sec. 2210.607. SOURCE OF PAYMENT. (a) Public securities
569	569	issued under this subchapter are payable only from:
570	570	(1) the service fees established under Section
571	571	2210.609, as applicable; or
572	572	(2) other amounts that the association is authorized
573	573	to levy, charge, and collect.
574	574	(b) The public securities are obligations solely of the
575	575	association and do not create a pledge, gift, or loan of the faith,
576	576	credit, or taxing authority of this state.
577	577	(c) Each public security must:
578	578	(1) include a statement that the state is not
579	579	obligated to pay any amount on the security and that the faith,
580	580	credit, or taxing authority of this state are not pledged, given, or
581	581	lent to those payments; and
582	582	(2) state on the security's face that the security:
583	583	(A) is payable solely from the revenue pledged
584	584	for that purpose; and
585	585	(B) is not and may not constitute a legal or moral
586	586	obligation of the state.
587	587	Sec. 2210.608. PAYMENT OF INTEREST. (a) Except as provided
588	588	by Subsection (b), all interest on a public security issued as
589	589	described by Section 2210.058(d) or (e) shall be paid by the
590	590	association from the existing premiums of the association.
591	591	(b) If the association is unable to pay the interest on a
592	592	public security described by Subsection (a) with existing premiums,
593	593	the interest on the public securities shall be paid from the service
594	594	fees collected in accordance with Section 2210.609.
595	595	Sec. 2210.609. SERVICE FEES; PREMIUM SURCHARGE. (a) A fee
596	596	to service public securities issued by the association prior or
597	597	subsequent to a catastrophic event may be collected by each
598	598	insurer, the association, and the FAIR Plan Association from
599	599	policyholders who reside or have operations in, or whose insured
600	600	property is located in, the catastrophe area.
601	601	(b) A fee to service public securities issued by the
602	602	association may be collected by each insurer, the association, and
603	603	the FAIR Plan Association from policyholders who reside or have
604	604	operations in, or whose insured property is located in, this state.
605	605	(c) The association shall determine the amount of a service
606	606	fee imposed under Subsection (a) or (b) at least annually.
607	607	(d) On approval by the commissioner after at least 10 days'
608	608	notice and a hearing, if a hearing is requested by any person within
609	609	the 10-day notice period, each insurer, the association, and the
610	610	FAIR Plan Association shall charge the service fee to its
611	611	policyholders. The service fee must be set in an amount sufficient
612	612	to pay all debt service and all related expenses on the public
613	613	securities. The service fee shall be collected in the form of a
614	614	premium surcharge and shall be remitted to the association as
615	615	required by the commissioner by rule.
616	616	(e) The premium surcharge shall apply to all insurance
617	617	policies for all property and casualty lines other than workers'
618	618	compensation, accident and health, and medical malpractice. The
619	619	service fees collected in the form of a policy surcharge under this
620	620	section are separate charges in addition to premiums collected and
621	621	are not subject to premium taxes or commissions.
622	622	(f) For purposes of policy cancellation, failure by a
623	623	policyholder to pay a premium surcharge imposed under this section
624	624	is equivalent to failure to pay premium.
625	625	Sec. 2210.610. EXEMPTION FROM TAXATION. Public securities
626	626	issued under this subchapter, any interest from those public
627	627	securities, and all assets pledged to secure the payment of the
628	628	public securities are free from taxation by the state or a political
629	629	subdivision of this state.
630	630	Sec. 2210.611. AUTHORIZED INVESTMENTS. Public securities
631	631	issued under this subchapter are authorized investments under
632	632	Subchapter B, Chapter 424, and Subchapters C and D, Chapter 425.
633	633	Sec. 2210.612. STATE PLEDGE REGARDING PUBLIC SECURITY OWNER
634	634	RIGHTS AND REMEDIES. (a) The state pledges to and agrees with the
635	635	owners of public securities issued in accordance with this
636	636	subchapter that the state will not limit or alter the rights vested
637	637	in the association to fulfill the terms of agreements made with the
638	638	owners or in any way impair the rights and remedies of those owners
639	639	until the following obligations are fully discharged:
640	640	(1) the public securities;
641	641	(2) any bond premium;
642	642	(3) interest; and
643	643	(4) all costs and expenses related to an action or
644	644	proceeding by or on behalf of the owners.
645	645	(b) The association may include the state's pledge and
646	646	agreement under Subsection (a) in an agreement with the owners of
647	647	the public securities.
648	648	Sec. 2210.613. PAYMENT ENFORCEABLE BY MANDAMUS. A writ of
649	649	mandamus and any other legal or equitable remedy are available to a
650	650	party in interest to require the association or another party to
651	651	fulfill an agreement or perform a function or duty under:
652	652	(1) this subchapter;
653	653	(2) the Texas Constitution; or
654	654	(3) a public security resolution.
655	655	SECTION 27. Section 941.003, Insurance Code, is amended by
656	656	adding Subsection (e) to read as follows:
657	657	(e) A Lloyd's plan is subject to Chapter 2210, as provided
658	658	by that chapter.
659	659	SECTION 28. Section 942.003, Insurance Code, is amended by
660	660	adding Subsection (f) to read as follows:
661	661	(f) An exchange is subject to Chapter 2210, as provided by
662	662	that chapter.
663	663	SECTION 29. The following laws are repealed:
664	664	(1) Section 2210.207(f), Insurance Code;
665	665	(2) Sections 2210.353(d), (e), and (f), Insurance
666	666	Code; and
667	667	(3) Section 2210.506, Insurance Code.
668	668	SECTION 30. (a) The board of directors of the Texas
669	669	Windstorm Insurance Association established under Section
670	670	2210.102, Insurance Code, as that section existed before amendment
671	671	by this Act, is abolished on the 30th day after the effective date
672	672	of this Act.
673	673	(b) The commissioner of insurance shall appoint the members
674	674	of the board of directors of the Texas Windstorm Insurance
675	675	Association under Section 2210.102, Insurance Code, as amended by
676	676	this Act, for terms beginning on the 31st day after the effective
677	677	date of this Act.
678	678	(c) The term of a person who is serving as a member of the
679	679	board of directors of the Texas Windstorm Insurance Association
680	680	immediately before the abolition of that board under Subsection (a)
681	681	of this section expires on the 30th day after the effective date of
682	682	this Act. Such a person is eligible for appointment by the
683	683	commissioner of insurance to the new board of directors of the Texas
684	684	Windstorm Insurance Association under Section 2210.102, Insurance
685	685	Code, as amended by this Act.
686	686	SECTION 31. This Act takes effect immediately if it
687	687	receives a vote of two-thirds of all the members elected to each
688	688	house, as provided by Section 39, Article III, Texas Constitution.
689	689	If this Act does not receive the vote necessary for immediate
690	690	effect, this Act takes effect September 1, 2009.