81R4967 PB-D
By: Eiland H.B. No. 3853
A BILL TO BE ENTITLED
AN ACT
relating to the operation of the Texas Windstorm Insurance
Association.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 2210.005, Insurance Code, is amended to
read as follows:
Sec. 2210.005. DESIGNATION AS CATASTROPHE AREA OR
INADEQUATE FIRE INSURANCE AREA; REVOCATION OF DESIGNATION. (a)
After at least 10 days' notice and a hearing, if a hearing is
requested by any person within the 10-day notice period, the
commissioner may designate an area of this state as a catastrophe
area if the commissioner determines that windstorm and hail
insurance is not reasonably available to a substantial number of
the owners of insurable property located in that territory because
the territory is subject to unusually frequent and severe damage
resulting from windstorms or hailstorms.
(b) After at least 10 days' notice and a hearing, if a
hearing is requested by any person within the 10-day notice period,
the commissioner may designate an area of this state as an
inadequate fire insurance area if the commissioner determines that
fire and explosion insurance is not reasonably available to a
substantial number of owners of insurable property located in that
area.
(c) The commissioner shall revoke a designation made under
Subsection (a) or (b) if the commissioner determines, after at
least 10 days' notice and a hearing, if a hearing is requested by
any person within the 10-day notice period, that the applicable
insurance coverage is no longer reasonably unavailable to a
substantial number of owners of insurable property within the
designated territory.
(d) If the association determines that windstorm and hail
insurance or fire and explosion insurance is no longer reasonably
unavailable to a substantial number of owners of insurable property
in a territory designated as a catastrophe area or inadequate fire
insurance area, as applicable, the association may request in
writing that the commissioner revoke the designation. After at
least 10 days' notice and a hearing, if a hearing is requested by
any person within the 10-day notice period, but not later than the
30th day after the date of the hearing or the expiration of the
notice period if a hearing is not requested, the commissioner
shall:
(1) approve the request and revoke the designation;
or
(2) reject the request.
SECTION 2. Section 2210.008, Insurance Code, is amended to
read as follows:
Sec. 2210.008. DEPARTMENT ORDERS. (a) After notice and an
opportunity for a hearing as provided by Subsection (b), the
commissioner may issue any orders that the commissioner considers
necessary to implement this chapter [, including orders] regarding
maximum rates, competitive rates, and policy forms.
(b) Before the commissioner adopts an order under
Subsection (a), the department shall post notice of the [hearing on
the] order at the secretary of state's office in Austin and shall
hold a hearing to consider the proposed order if a hearing is
requested by any person not later than the 10th day after the date
on which the notice is posted. Any person may appear at such a [the]
hearing and testify for or against the adoption of the order.
SECTION 3. Sections 2210.052(a) and (d), Insurance Code,
are amended to read as follows:
(a) Each member of the association shall participate in the
assessments [writings, expenses, profits, and losses] of the
association in the proportion that the net direct premiums of that
member during the preceding calendar year bears to the aggregate
net direct premiums by all members of the association, as
determined using the information provided under Subsection (b).
(d) Notwithstanding Subsection (a), a member, in accordance
with the plan of operation, is entitled to receive credit for
similar insurance voluntarily written in an area designated by the
commissioner. The member's participation in the assessments
[writings] of the association shall be reduced in accordance with
the plan of operation.
SECTION 4. Section 2210.056(c), Insurance Code, is amended
to read as follows:
(c) On dissolution of the association, all assets of the
association revert to this state and shall be deposited in the
general revenue fund.
SECTION 5. Section 2210.058, Insurance Code, is amended to
read as follows:
Sec. 2210.058. PAYMENT OF EXCESS LOSSES[; PREMIUM TAX
CREDIT]. (a) If[, in any calendar year,] an occurrence or series
of occurrences, as defined in the plan of operation, in a
catastrophe area results in insured losses and operating expenses
of the association in excess of premium and other revenue of the
association, the excess losses shall be paid as provided by this
section.
(b) An amount not to exceed [follows:
[(1)] $100 million for each occurrence shall be
assessed against the members of the association and the Texas FAIR
Plan Association. The loss allocable to the Texas FAIR Plan
Association shall be based on the proportion that the net direct
premiums written by the Texas FAIR Plan Association during the
preceding calendar year bears to the total net direct premiums
written in this state by all members of the association for the same
period, as determined under Section 2210.052. The remainder of the
assessments shall be allocated to each member insurer in the manner
used to determine each insurer's participation in the association
for the year under Section 2210.052. Assessments made under this
subsection are not reimbursable under Subsection (g).
(c) For each occurrence, any [as provided by Subsection (b);
[(2)] losses in excess of $100 million shall be paid as
provided by this subsection from the catastrophe reserve trust fund
established under Subchapter J. Not more than 50 percent of the
amount in the catastrophe reserve trust fund as of the date of the
occurrence, reduced by anticipated payments from prior
occurrences, may be used to pay losses under this subsection unless
the commissioner determines that a greater percentage should be
applied after at least 10 days' notice and a hearing, if a hearing
is requested by any person within the 10-day notice period.
(d) Any [and any reinsurance program established by the
association;
[(3) for] losses in excess of the amounts determined
under Subsections (b) and (c) [those paid under Subdivisions (1)
and (2), an additional $200 million] shall be paid in accordance
with a plan developed by the association and approved by the
commissioner after at least 10 days' notice and a hearing if a
hearing is requested by any person within the 10-day notice period,
from any or a combination of the following sources:
(1) additional assessments to the members of the
association and the Texas FAIR Plan Association, not to exceed $300
million per calendar year, which shall be based on the proportion of
the member's or the Texas FAIR Plan Association's net direct
premiums for the lines of insurance used to compute member
participation in the association's assessments under Section
2210.052 as reported in the association's annual statement filed
with the department for the calendar year immediately preceding the
year in which the assessment is made, to the total reported net
direct premiums for those insurance lines in this state;
(2) any reinsurance proceeds recoverable by the
association; and
(3) any proceeds from public securities received by
the association under Subchapter M.
(e) Any [assessed against the members of the association, as
provided by Subsection (b); and
[(4)] losses of the association that are not [in
excess of those] paid by assessments and the catastrophe reserve
trust fund as provided by Subsections (b) and (c) or are not paid by
the plan approved by the commissioner under Subsection (d)
[Subdivisions (1), (2), and (3)] shall be paid from the proceeds
from public securities received by the association under Subchapter
M [assessed against members of the association, as provided by
Subsection (b)].
(f) Assessments under Subsection (d)(1) are reimbursable in
accordance with Subsection (g) [(b) The proportion of the losses
allocable to each insurer under Subsections (a)(1), (3), and (4)
shall be determined in the manner used to determine each insurer's
participation in the association for the year under Section
2210.052].
(g) [(c)] An insurer, including the Texas FAIR Plan
Association, that has been assessed and has paid the assessments
under Subsection (d)(1) may charge a premium surcharge for
reimbursement of the assessment. The premium surcharge must be a
charge separate from and in addition to premiums collected. The
premium surcharge applies to each insurance policy for the lines
used to compute the assessment issued by the insurer or the Texas
FAIR Plan Association in this state, the effective date of which is
within the five-year period beginning on the 90th day after the date
of the assessment. The amount of the surcharge shall be computed on
the basis of a uniform percentage of the premium on those policies,
not to exceed 20 percent per year, of the amount of the assessment,
such that over the five-year period the aggregate of all surcharges
by the insurer or the Texas FAIR Plan Association equals but does
not exceed the amount of the assessment. The amount of an
assessment paid and recoverable under this subsection [may credit
an amount paid in accordance with Subsection (a)(4) in a calendar
year against the insurer's premium tax under Chapter 221. The tax
credit authorized under this subsection shall be allowed at a rate
not to exceed 20 percent per year for five or more successive years
beginning the calendar year that the assessments under this section
are paid. The balance of payments made by the insurer and not
claimed as a premium tax credit] may be reflected in the books and
records of the insurer or the Texas FAIR Plan Association as an
admitted asset of the insurer for all purposes, including
exhibition in an annual statement under Section 862.001.
(h) If losses are paid by the procedures under Subsection
(d)(1), the association shall develop and implement a plan for
collection of a premium surcharge from policyholders of the
association. The premium surcharge must be a charge separate from
and in addition to premiums collected. The association shall
establish the premium surcharge in an amount at least 100 percent
and not more than 150 percent of the average per-policy surcharge
percentage established under Subsection (g) on any policy issued or
renewed by the association. The period for collection of the
premium surcharge under this subsection may not exceed five years.
Each surcharge collected under this subsection shall be deposited
in the catastrophe reserve trust fund.
(i) In addition to the funding described by Subsections
(b)-(h), the association may also borrow from, or enter into other
financing arrangements with, any market sources at prevailing
interest rates.
(j) The commissioner may adopt rules as necessary to
implement this section.
SECTION 6. Section 2210.059, Insurance Code, is amended to
read as follows:
Sec. 2210.059. NOTIFICATION REGARDING CERTAIN LOSSES [TAX
CREDITS]. (a) The association shall immediately notify the
department if an occurrence or series of occurrences in a
catastrophe area results in insured losses that result in
assessments, payments from the trust fund established under Section
2210.452, or claims under a reinsurance contract approved under
Section 2210.453 [a tax credit under Section 2210.058(c) in a
calendar year].
(b) On receipt of notice under Subsection (a), the
department shall immediately notify the governor and the
appropriate committees of each house of the legislature of the
amount of insured losses eligible for payments using assessment
funds, catastrophe reserve trust funds, or reinsurance proceeds
[tax credits under Section 2210.058(c)].
SECTION 7. Section 2210.060(c), Insurance Code, is amended
to read as follows:
(c) Subsection (a) does not authorize the association to
indemnify a member of the association for participating in the
assessments made by [writings, expenses, profits, and losses of]
the association in the manner provided by this chapter.
SECTION 8. Section 2210.102, Insurance Code, is amended by
amending Subsection (a) and adding Subsection (c) to read as
follows:
(a) The board of directors is composed of the following 11
[nine] members appointed by the commissioner:
(1) five members who represent the interests of
[representatives of different] insurers who are members of the
association[, elected by the members as provided by the plan of
operation];
(2) four members who represent the interests of the
[two] public, [representatives] who are nominated by the office of
public insurance counsel, and who, as of the date of the
appointment:
(A) reside in a catastrophe area; and
(B) are policyholders of the association; and
(3) two members who are property and casualty agents,
each of whom must:
(A) have demonstrated experience in the
association;
(B) maintain the agent's principal office, as of
the date of the appointment, in a catastrophe area; and
(C) hold a license under Chapter 4051 as a
general property and casualty agent or a personal lines property
and casualty agent.
(c) To be eligible to serve on the board of directors as a
representative of insurers, a person must be a full-time employee
of an authorized insurer that is a member of the association.
SECTION 9. Section 2210.103, Insurance Code, is amended by
amending Subsection (a) and adding Subsection (c) to read as
follows:
(a) Members of the board of directors serve three-year
staggered terms, with the terms of three or four members expiring on
the third Tuesday of March of each year.
(c) A member of the board of directors serves at the
pleasure of the commissioner. The commissioner shall appoint a
replacement for a member who leaves or is removed from the board of
directors in the manner provided by Section 2210.102.
SECTION 10. Subchapter C, Chapter 2210, Insurance Code, is
amended by adding Section 2210.1051 to read as follows:
Sec. 2210.1051. MEETINGS OF BOARD OF DIRECTORS. (a)
Notwithstanding Chapter 551, Government Code, or any other law,
members of the board of directors may meet by telephone conference
call, videoconference, or other similar telecommunication method.
The board may use telephone conference call, videoconference, or
other similar telecommunication method for purposes of
establishing a quorum or voting or for any other meeting purpose in
accordance with this subsection and Subsection (b). This
subsection applies without regard to the subject matter discussed
or considered by the members of the board at the meeting.
(b) A meeting held by telephone conference call,
videoconference, or other similar telecommunication method:
(1) is subject to the notice requirements applicable
to other meetings of the board of directors;
(2) may not be held unless notice of the meeting
specifies the location of the meeting;
(3) must be audible to the public at the location
specified in the notice under Subdivision (2); and
(4) must provide two-way audio communication between
all members of the board attending the meeting during the entire
meeting, and if the two-way audio communication link with members
attending the meeting is disrupted so that a quorum of the board is
no longer participating in the meeting, the meeting may not
continue until the two-way audio communication link is
reestablished.
SECTION 11. Section 2210.152, Insurance Code, is amended by
adding Subsection (c) to read as follows:
(c) The plan of operation may contain provisions allowing
the association to change its methods and procedures for doing
business in ways that allow the association to implement new
technologies designed to make the association up to date and
efficient in its operations.
SECTION 12. Section 2210.153(a), Insurance Code, is amended
to read as follows:
(a) The association may present a recommendation for a
change in the plan of operation to the department [at:
[(1) periodic hearings conducted by the department for
that purpose; or
[(2) hearings relating to property and casualty
insurance rates].
SECTION 13. Section 2210.202(b), Insurance Code, is amended
to read as follows:
(b) A general property and casualty agent or a personal
lines property and casualty agent must submit an application for
the insurance coverage on behalf of the applicant on forms
prescribed by the association. [The application must contain a
statement as to whether the applicant has submitted or will submit
the premium in full from personal funds or, if not, to whom a
balance is or will be due.]
SECTION 14. Section 2210.207(e), Insurance Code, is amended
to read as follows:
(e) Notwithstanding this chapter or any other law, the
commissioner[, after notice and hearing,] may adopt rules to:
(1) authorize the association to provide actual cash
value coverage instead of replacement cost coverage on the roof
covering of a building insured by the association; and
(2) establish:
(A) the conditions under which the association
may provide that actual cash value coverage;
(B) the appropriate premium reductions when
coverage for the roof covering is provided on an actual cash value
basis; and
(C) the disclosure that must be provided to the
policyholder, prominently displayed on the face of the windstorm
and hail insurance policy.
SECTION 15. Sections 2210.256(a), (b), (d), and (f),
Insurance Code, are amended to read as follows:
(a) After notice and an opportunity for a hearing, the
department may revoke an appointment made under Section 2210.254 if
the appointee is found to be in violation of this subchapter or a
rule of the commissioner adopted under this subchapter.
(b) The commissioner, instead of revocation, may impose
sanctions and penalties under Chapter 82, including one or more of
the following sanctions if the commissioner determines from the
facts that the sanction would be fair, reasonable, or equitable:
(1) suspension of the appointment for a specific
period, not to exceed one year;
(2) issuance of an order directing the appointee to
cease and desist from the specified activity or failure to act
determined to be in violation of this subchapter or rules of the
commissioner adopted under this subchapter; or
(3) if the commissioner finds that the appointee
knowingly, wilfully, fraudulently, or with gross negligence failed
to file the required inspection reports, or signed or caused to be
prepared an inspection report that contains a false or fraudulent
statement, issuance of an order directing the appointee to pay
within a specified time, not to exceed 60 days, a fine not to exceed
$5,000 for the violation.
(d) If it is found [after a hearing] that an appointee has
failed to comply with an order issued under Subsection (b), the
department shall, unless the order is stayed, revoke the
appointment of the person.
(f) If an appointee is an engineer licensed by the Texas
Board of Professional Engineers who is found by the department to
have knowingly, wilfully, fraudulently, or with gross negligence
failed to file the required inspection reports, or signed or caused
to be prepared an inspection report that contains a false or
fraudulent statement, the commissioner may take action against the
appointee in the manner provided by Subsections (a) and (b) but may
not assess a fine against the appointee. The commissioner shall
notify the Texas Board of Professional Engineers of an order issued
by the commissioner against an appointee who is an engineer
licensed by that board, including an order suspending or revoking
the appointment of the person.
SECTION 16. Section 2210.307(h), Insurance Code, is amended
to read as follows:
(h) The advisory committee shall submit to the commissioner
the committee's recommendation on each proposal. The commissioner
shall notify the advisory committee of the acceptance or rejection
of each recommendation not later than the 30th day after the date of
receipt by the commissioner. Acceptance of a recommendation by the
commissioner means that the commissioner will consider adoption of
that recommendation at a rulemaking proceeding [hearing]. Before
adopting a recommendation, the commissioner must determine that the
proposal, if adopted, will not weaken the integrity or diminish the
effectiveness of a procedure.
SECTION 17. Section 2210.351(d), Insurance Code, is amended
to read as follows:
(d) If at any time the commissioner determines that a filing
approved under Subsection (c) no longer meets the requirements of
this chapter, the commissioner may, after [a hearing held on] at
least 10 days' notice and a hearing, if a hearing is requested by
any person within the 10-day notice period [20 days' notice to the
association that specifies the matters to be considered at the
hearing], issue an order withdrawing approval of the filing. The
order must specify in what respects the commissioner determines
that the filing no longer meets the requirements of this chapter.
An order issued under this subsection may not take effect before the
30th day after the date of issuance of the order.
SECTION 18. Sections 2210.352(a) and (c), Insurance Code,
are amended to read as follows:
(a) Not later than August 15 of each year, the association
shall file with the department for approval by the commissioner a
proposed manual rate for all types and classes of risks written by
the association. [Chapter 40 does not apply to:
[(1) a filing made under this subsection; or
[(2) a department action with respect to the filing.]
(c) On request, the [The] commissioner shall schedule an
open meeting not later than the 45th day after the date the
department receives a filing at which interested persons may
present written or oral comments relating to the filing.
SECTION 19. Section 2210.355(b), Insurance Code, is amended
to read as follows:
(b) In adopting rates under this chapter, the following must
be considered:
(1) the past and prospective loss experience within
and outside this state of hazards for which insurance is made
available through the plan of operation, if any;
(2) recognized catastrophe models;
(3) expenses of operation, including acquisition
costs;
(4) [(3)] a reasonable margin for profit and
contingencies; and
(5) [(4)] all other relevant factors, within and
outside this state.
SECTION 20. Section 2210.356(b), Insurance Code, is amended
to read as follows:
(b) The catastrophe element used to develop rates under this
subchapter applicable to risks written by the association must be
uniform throughout the seacoast territory. The catastrophe element
of the rates must be developed using:
(1) 90 percent of both the monoline extended coverage
loss experience and related premium income for all insurers, other
than the association, for covered property located in the seacoast
territory, using not less than the most recent 30 years of
experience available; [and]
(2) 100 percent of both the loss experience and
related premium income for the association for covered property,
using not less than the most recent 30 years of experience
available; and
(3) recognized catastrophe models and any other
relevant factors as identified under Section 2210.355(b).
SECTION 21. Section 2210.359(b), Insurance Code, is amended
to read as follows:
(b) The commissioner may[, after notice and hearing,]
suspend this section on a finding that a catastrophe loss or series
of occurrences resulting in losses in the catastrophe area justify
a need to ensure:
(1) rate adequacy in the catastrophe area; and
(2) availability of insurance outside the catastrophe
area.
SECTION 22. Section 2210.361(b), Insurance Code, is amended
to read as follows:
(b) After notice and hearing, if a hearing is requested by
any person not later than the 10th day after the date on which the
notice is posted, the commissioner may accept, modify, or reject a
recommendation made by the association under this section. Chapter
40 does not apply to an action taken under this section.
SECTION 23. Sections 2210.452(a), (c), and (d), Insurance
Code, are amended to read as follows:
(a) The commissioner shall adopt rules under which the
association relinquishes its [members relinquish their] net equity
on an annual basis as provided by those rules by making payments to
the catastrophe reserve trust fund. The trust fund may be used only
to fund:
(1) the obligations of the trust fund under Section
2210.058 [2210.058(a)]; and
(2) the mitigation and preparedness plan established
under Section 2210.454 to reduce the potential for payments by
association members [that give rise to tax credits in the event of
loss].
(c) At the end of each calendar year or policy year, the
association shall pay the net gain from operations [equity] of the
association [a member], including all premium and other revenue of
the association in excess of incurred losses and operating
expenses, to the trust fund or a reinsurance program approved by the
commissioner. For the purposes of this subsection, "operating
expenses" includes the cost of any reinsurance.
(d) The commissioner by rule shall establish the procedure
relating to the disbursement of money from the trust fund [to
policyholders in the event of an occurrence or series of
occurrences within a catastrophe area that results in a
disbursement under Section 2210.058(a)]. The rules may provide
that money from the trust fund may be used to purchase reinsurance
to protect the trust fund or to reimburse the association for the
payment of policyholder claims. Any reinsurance purchases under
this subsection must be included in the reinsurance approved under
Section 2210.453.
SECTION 24. Section 2210.453, Insurance Code, is amended to
read as follows:
Sec. 2210.453. REINSURANCE PROGRAM. (a) The association may
[shall]:
(1) make payments into the trust fund; and [or]
(2) purchase [establish a] reinsurance as part of the
association's annual operating expenses to the extent [program]
approved by the department.
(b) With the approval of the department, the association may
use [establish a] reinsurance [program] that operates in addition
to or in concert with the trust fund and with assessments authorized
by this chapter.
SECTION 25. Section 2210.504(a), Insurance Code, is amended
to read as follows:
(a) Not later than the 60th day after the date of receipt of
a filing under Section 2210.503, [and after notice and hearing,]
the commissioner by order shall approve, disapprove, or modify the
proposed adjustment to the maximum liability limits.
SECTION 26. Chapter 2210, Insurance Code, is amended by
adding Subchapter M to read as follows:
SUBCHAPTER M. PUBLIC SECURITIES PROGRAM
Sec. 2210.601. PURPOSE. The legislature finds that issuing
public securities to provide a method to raise funds to provide
windstorm, hail, and fire insurance through the association in
certain designated areas of the state is to benefit the public and
to further a public purpose.
Sec. 2210.602. DEFINITIONS. In this subchapter:
(1) "Board" means the board of directors of the Texas
Public Finance Authority.
(2) "Insurer" means each property and casualty insurer
authorized to engage in the business of property and casualty
insurance in this state. The term specifically includes a county
mutual insurance company, a Lloyd's plan, and a reciprocal or
interinsurance exchange. The term does not include a county mutual
insurance company described by Section 912.310.
(3) "Public security" means a debt instrument or other
public security issued by the Texas Public Finance Authority.
(4) "Public security resolution" means the resolution
or order authorizing public securities to be issued under this
subchapter.
Sec. 2210.603. APPLICABILITY OF OTHER LAWS. (a) To the
extent consistent with this subchapter, Chapter 1232, Government
Code, applies to public securities issued under this subchapter.
In the event of a conflict, this subchapter controls.
(b) The following laws also apply to public securities
issued under this subchapter to the extent consistent with this
subchapter:
(1) Chapters 1201, 1202, 1204, 1205, 1231, and 1371,
Government Code; and
(2) Subchapter A, Chapter 1206, Government Code.
Sec. 2210.604. ISSUANCE OF PUBLIC SECURITIES AUTHORIZED.
(a) At the request of the association and with the approval of the
commissioner, the Texas Public Finance Authority shall issue public
securities to:
(1) fund the association, including funding necessary
to:
(A) establish and maintain reserves to pay
claims;
(B) pay incurred claims;
(C) pay operating expenses; and
(D) purchase reinsurance;
(2) pay costs related to issuance of the public
securities; and
(3) pay other costs related to the public securities
as may be determined by the board.
(b) The Texas Public Finance Authority may issue, on behalf
of the association, public securities in an amount sufficient to
fund the insured losses and operating expenses of the association
as determined by the association and approved by the commissioner
after at least 10 days' notice and a hearing if a hearing is
requested by any person within the 10-day notice period.
Sec. 2210.605. TERMS OF ISSUANCE. (a) Public securities
issued under this subchapter may be issued at a public or private
sale.
(b) Public securities must:
(1) be issued in the name of the association; and
(2) mature not more than 10 years after the date
issued.
Sec. 2210.606. CONTENTS OF PUBLIC SECURITY RESOLUTION;
ADMINISTRATION OF ACCOUNTS. (a) In a public security resolution,
the board may:
(1) provide for the flow of funds and the
establishment, maintenance, and investment of funds and special
accounts with regard to the public securities, including an
interest and sinking fund account, a reserve account, and other
accounts; and
(2) make additional covenants with respect to the
public securities and the designated income and receipts of the
association pledged to the payment of the public securities.
(b) The association shall administer the accounts in
accordance with this subchapter.
Sec. 2210.607. SOURCE OF PAYMENT. (a) Public securities
issued under this subchapter are payable only from:
(1) the service fees established under Section
2210.609, as applicable; or
(2) other amounts that the association is authorized
to levy, charge, and collect.
(b) The public securities are obligations solely of the
association and do not create a pledge, gift, or loan of the faith,
credit, or taxing authority of this state.
(c) Each public security must:
(1) include a statement that the state is not
obligated to pay any amount on the security and that the faith,
credit, or taxing authority of this state are not pledged, given, or
lent to those payments; and
(2) state on the security's face that the security:
(A) is payable solely from the revenue pledged
for that purpose; and
(B) is not and may not constitute a legal or moral
obligation of the state.
Sec. 2210.608. PAYMENT OF INTEREST. (a) Except as provided
by Subsection (b), all interest on a public security issued as
described by Section 2210.058(d) or (e) shall be paid by the
association from the existing premiums of the association.
(b) If the association is unable to pay the interest on a
public security described by Subsection (a) with existing premiums,
the interest on the public securities shall be paid from the service
fees collected in accordance with Section 2210.609.
Sec. 2210.609. SERVICE FEES; PREMIUM SURCHARGE. (a) A fee
to service public securities issued by the association prior or
subsequent to a catastrophic event may be collected by each
insurer, the association, and the FAIR Plan Association from
policyholders who reside or have operations in, or whose insured
property is located in, the catastrophe area.
(b) A fee to service public securities issued by the
association may be collected by each insurer, the association, and
the FAIR Plan Association from policyholders who reside or have
operations in, or whose insured property is located in, this state.
(c) The association shall determine the amount of a service
fee imposed under Subsection (a) or (b) at least annually.
(d) On approval by the commissioner after at least 10 days'
notice and a hearing, if a hearing is requested by any person within
the 10-day notice period, each insurer, the association, and the
FAIR Plan Association shall charge the service fee to its
policyholders. The service fee must be set in an amount sufficient
to pay all debt service and all related expenses on the public
securities. The service fee shall be collected in the form of a
premium surcharge and shall be remitted to the association as
required by the commissioner by rule.
(e) The premium surcharge shall apply to all insurance
policies for all property and casualty lines other than workers'
compensation, accident and health, and medical malpractice. The
service fees collected in the form of a policy surcharge under this
section are separate charges in addition to premiums collected and
are not subject to premium taxes or commissions.
(f) For purposes of policy cancellation, failure by a
policyholder to pay a premium surcharge imposed under this section
is equivalent to failure to pay premium.
Sec. 2210.610. EXEMPTION FROM TAXATION. Public securities
issued under this subchapter, any interest from those public
securities, and all assets pledged to secure the payment of the
public securities are free from taxation by the state or a political
subdivision of this state.
Sec. 2210.611. AUTHORIZED INVESTMENTS. Public securities
issued under this subchapter are authorized investments under
Subchapter B, Chapter 424, and Subchapters C and D, Chapter 425.
Sec. 2210.612. STATE PLEDGE REGARDING PUBLIC SECURITY OWNER
RIGHTS AND REMEDIES. (a) The state pledges to and agrees with the
owners of public securities issued in accordance with this
subchapter that the state will not limit or alter the rights vested
in the association to fulfill the terms of agreements made with the
owners or in any way impair the rights and remedies of those owners
until the following obligations are fully discharged:
(1) the public securities;
(2) any bond premium;
(3) interest; and
(4) all costs and expenses related to an action or
proceeding by or on behalf of the owners.
(b) The association may include the state's pledge and
agreement under Subsection (a) in an agreement with the owners of
the public securities.
Sec. 2210.613. PAYMENT ENFORCEABLE BY MANDAMUS. A writ of
mandamus and any other legal or equitable remedy are available to a
party in interest to require the association or another party to
fulfill an agreement or perform a function or duty under:
(1) this subchapter;
(2) the Texas Constitution; or
(3) a public security resolution.
SECTION 27. Section 941.003, Insurance Code, is amended by
adding Subsection (e) to read as follows:
(e) A Lloyd's plan is subject to Chapter 2210, as provided
by that chapter.
SECTION 28. Section 942.003, Insurance Code, is amended by
adding Subsection (f) to read as follows:
(f) An exchange is subject to Chapter 2210, as provided by
that chapter.
SECTION 29. The following laws are repealed:
(1) Section 2210.207(f), Insurance Code;
(2) Sections 2210.353(d), (e), and (f), Insurance
Code; and
(3) Section 2210.506, Insurance Code.
SECTION 30. (a) The board of directors of the Texas
Windstorm Insurance Association established under Section
2210.102, Insurance Code, as that section existed before amendment
by this Act, is abolished on the 30th day after the effective date
of this Act.
(b) The commissioner of insurance shall appoint the members
of the board of directors of the Texas Windstorm Insurance
Association under Section 2210.102, Insurance Code, as amended by
this Act, for terms beginning on the 31st day after the effective
date of this Act.
(c) The term of a person who is serving as a member of the
board of directors of the Texas Windstorm Insurance Association
immediately before the abolition of that board under Subsection (a)
of this section expires on the 30th day after the effective date of
this Act. Such a person is eligible for appointment by the
commissioner of insurance to the new board of directors of the Texas
Windstorm Insurance Association under Section 2210.102, Insurance
Code, as amended by this Act.
SECTION 31. This Act takes effect immediately if it
receives a vote of two-thirds of all the members elected to each
house, as provided by Section 39, Article III, Texas Constitution.
If this Act does not receive the vote necessary for immediate
effect, this Act takes effect September 1, 2009.