Texas 2009 - 81st Regular

Texas House Bill HB4733 Compare Versions

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

Old	New	Differences
1	1	81R5032 PB-D
2	2	By: Smithee H.B. No. 4733
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to the operation and funding of the Texas Windstorm
8	8	Insurance Association, including funding of coverage for certain
9	9	catastrophic events through the issuance of public securities.
10	10	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
11	11	SECTION 1. Section 2210.001, Insurance Code, is amended to
12	12	read as follows:
13	13	Sec. 2210.001. PURPOSE. (a) An adequate market for
14	14	windstorm and[,] hail[, and fire] insurance in the seacoast
15	15	territory is necessary to the economic welfare of this state, and
16	16	without that insurance, the orderly growth and development of this
17	17	state would be severely impeded. This chapter provides a method by
18	18	which adequate windstorm and[,] hail[, and fire] insurance may be
19	19	obtained in certain designated portions of the seacoast territory
20	20	of this state.
21	21	(b) The purpose of the Texas Windstorm Insurance
22	22	Association is to serve as a residual insurer of last resort for
23	23	windstorm and hail insurance in the seacoast territory. The
24	24	association shall function in such a manner as to not be a direct
25	25	competitor in the private market and shall provide insurance
26	26	coverage to persons who are unable to obtain insurance coverage in
27	27	the private market.
28	28	SECTION 2. Section 2210.003(6), Insurance Code, is amended
29	29	to read as follows:
30	30	(6) "Insurance" means Texas [fire and explosion
31	31	insurance and Texas] windstorm and hail insurance.
32	32	SECTION 3. Sections 2210.004(a) and (g), Insurance Code,
33	33	are amended to read as follows:
34	34	(a) Except as provided by Subsection (h), for purposes of
35	35	this chapter and subject to this section, "insurable property"
36	36	means immovable property at a fixed location in a catastrophe area
37	37	or corporeal movable property located in that immovable property,
38	38	as designated in the plan of operation, that is determined by the
39	39	association according to the criteria specified in the plan of
40	40	operation to be in an insurable condition against windstorm and
41	41	hail [or fire and explosion, as appropriate], as determined by
42	42	normal underwriting standards. The term includes property
43	43	described by Section 2210.209.
44	44	(g) For purposes of this chapter, a residential structure is
45	45	insurable property if:
46	46	(1) the residential structure is not:
47	47	(A) a condominium, apartment, duplex, or other
48	48	multifamily residence; or
49	49	(B) a hotel or resort facility; and
50	50	(2) the residential structure is located within an
51	51	area designated as a unit under the Coastal Barrier Resources Act
52	52	(Pub. L. No. 97-348)[; and
53	53	[(3) a building permit or plat for the residential
54	54	structure was filed with the municipality, the county, or the
55	55	United States Army Corps of Engineers before June 11, 2003].
56	56	SECTION 4. Section 2210.005, Insurance Code, is amended to
57	57	read as follows:
58	58	Sec. 2210.005. DESIGNATION AS CATASTROPHE AREA [OR
59	59	INADEQUATE FIRE INSURANCE AREA]; REVOCATION OF DESIGNATION. (a)
60	60	After at least 10 days' notice and a hearing, the commissioner may
61	61	designate an area of the seacoast area of this state as a
62	62	catastrophe area if the commissioner determines that windstorm and
63	63	hail insurance is not reasonably available to a substantial number
64	64	of the owners of insurable property located in that territory
65	65	because the territory is subject to unusually frequent and severe
66	66	damage resulting from windstorms or hailstorms.
67	67	(b) [After at least 10 days' notice and a hearing, the
68	68	commissioner may designate an area of this state as an inadequate
69	69	fire insurance area if the commissioner determines that fire and
70	70	explosion insurance is not reasonably available to a substantial
71	71	number of owners of insurable property located in that area.
72	72	[(c)] The commissioner shall revoke a designation made under
73	73	Subsection (a) [or (b)] if the commissioner determines, after at
74	74	least 10 days' notice and a hearing, that the applicable insurance
75	75	coverage is no longer reasonably unavailable to a substantial
76	76	number of owners of insurable property within the designated
77	77	territory.
78	78	(c) [(d)] If the association determines that windstorm and
79	79	hail insurance [or fire and explosion insurance] is no longer
80	80	reasonably unavailable to a substantial number of owners of
81	81	insurable property in a territory designated as a catastrophe area
82	82	[or inadequate fire insurance area, as applicable], the association
83	83	may request in writing that the commissioner revoke the
84	84	designation. After at least 10 days' notice and a hearing, but not
85	85	later than the 30th day after the date of the hearing, the
86	86	commissioner shall:
87	87	(1) approve the request and revoke the designation; or
88	88	(2) reject the request.
89	89	SECTION 5. Subchapter A, Chapter 2210, Insurance Code, is
90	90	amended by adding Section 2210.009 to read as follows:
91	91	Sec. 2210.009. LIST OF PRIVATE INSURERS; INCENTIVE PLAN.
92	92	(a) The department shall maintain a list of all insurers that
93	93	engage in the business of property and casualty insurance in the
94	94	voluntary market in the seacoast territory.
95	95	(b) The department shall develop incentive programs in the
96	96	manner described by Section 2210.053(b) to encourage authorized
97	97	insurers to write insurance on a voluntary basis and to minimize the
98	98	use of the association as a means to obtain insurance.
99	99	SECTION 6. Sections 2210.052(a), (c), and (d), Insurance
100	100	Code, are amended to read as follows:
101	101	(a) Each member of the association shall participate in
102	102	insured losses and operating expenses of the association, in excess
103	103	of premium and other revenue [the writings, expenses, profits, and
104	104	losses] of the association, in the proportion that the net direct
105	105	premiums of that member during the preceding calendar year bears to
106	106	the aggregate net direct premiums by all members of the
107	107	association, as determined using the information provided under
108	108	Subsection (b).
109	109	(c) Each member's participation in the association shall be
110	110	determined annually in the manner provided by the plan of
111	111	operation. For purposes of determining participation in the
112	112	association, two or more members that are subject to common
113	113	ownership or that operate in this state under common management or
114	114	control shall be treated as a single member. [The determination
115	115	shall also include the net direct premiums of an affiliate that is
116	116	under that common management or control, including an affiliate
117	117	that is not authorized to engage in the business of property
118	118	insurance in this state.]
119	119	(d) Notwithstanding Subsection (a), a member, in accordance
120	120	with the plan of operation, is entitled to receive credit for
121	121	similar insurance voluntarily written in an area designated by the
122	122	commissioner. The member's participation in the insured losses and
123	123	operating expenses of the association in excess of premium and
124	124	other revenue [writings] of the association shall be reduced in
125	125	accordance with the plan of operation. Incentives adopted under
126	126	the plan of operation must include a minimum level of participation
127	127	for an insurer voluntarily writing coverage in a catastrophe area,
128	128	and may not include a maximum level to cap a member's actual
129	129	statewide writings compared with other members.
130	130	SECTION 7. Section 2210.058, Insurance Code, is amended to
131	131	read as follows:
132	132	Sec. 2210.058. PAYMENT OF EXCESS LOSSES[; PREMIUM TAX
133	133	CREDIT]. (a) If, in any calendar year, an occurrence or series of
134	134	occurrences in a catastrophe area results in insured losses and
135	135	operating expenses of the association in excess of premium and
136	136	other revenue of the association, the excess losses shall be paid as
137	137	provided by this section.
138	138	(b) The association shall pay excess losses from available
139	139	reserves of the association and available amounts in [follows:
140	140	[(1) $100 million shall be assessed against the
141	141	members of the association as provided by Subsection (b);
142	142	[(2) losses in excess of $100 million shall be paid
143	143	from] the catastrophe reserve trust fund established under
144	144	Subchapter J.
145	145	(c) For [and any reinsurance program established by the
146	146	association;
147	147	[(3) for] losses in excess of those paid under
148	148	Subsection (b), catastrophe area public securities may be issued in
149	149	the manner prescribed by Subchapter M. Catastrophe area public
150	150	securities issued under this subsection may be issued before or on
151	151	or after the occurrence of a catastrophic event in amounts
152	152	necessary to fund not more than 45 percent of the required solvency
153	153	level determined under Subchapter N. All catastrophe area public
154	154	securities obligations shall be paid in the manner prescribed by
155	155	Section 2210.609, if applicable, and Section 2210.611.
156	156	(d) For [Subdivisions (1) and (2), an additional $200
157	157	million shall be assessed against the members of the association,
158	158	as provided by Subsection (b); and
159	159	[(4)] losses in excess of those paid under Subsections
160	160	(b) and (c), Class 1 public securities may be issued before or on or
161	161	after the occurrence of a catastrophic event in the manner
162	162	prescribed by Subchapter M. Class 1 post-event public securities
163	163	may be issued only on or after a named storm has caused damage in the
164	164	seacoast territory and the board of directors has determined that
165	165	the combination of association reserves, amounts available in the
166	166	catastrophe reserve trust fund, catastrophe area public
167	167	securities, and Class 1 pre-event public securities, if any, are
168	168	insufficient to pay the losses. The board of directors may request
169	169	the commissioner to authorize Class 1 public securities in an
170	170	amount sufficient to pay projected losses up to an amount not to
171	171	exceed 50 percent of the required solvency level determined under
172	172	Subchapter N. All Class 1 public securities obligations shall be
173	173	paid in the manner prescribed by Section 2210.609, if applicable,
174	174	and Section 2210.612.
175	175	(e) For losses in excess of those paid under Subsections
176	176	(b)-(d), the board of directors of the association may request the
177	177	commissioner to authorize member company public securities, in an
178	178	amount not to exceed $500 million, to be issued after a catastrophic
179	179	event in the manner prescribed by Subchapter M. Member company
180	180	public securities obligations shall be paid in the manner
181	181	prescribed by Section 2210.613.
182	182	(f) For losses in excess of those paid under Subsections
183	183	(b)-(e), the board of directors may request the commissioner to
184	184	authorize Class 2 post-event public securities to be issued under
185	185	this subsection on or after a catastrophic event in the manner
186	186	prescribed by Subchapter M. The commissioner may authorize Class 2
187	187	post-event public securities under this subsection to pay losses
188	188	above the required solvency level determined under Subchapter N, in
189	189	an amount sufficient to pay losses but not to exceed $3 billion.
190	190	All Class 2 post-event public securities obligations shall be paid
191	191	in the manner prescribed by Section 2210.614.
192	192	(g) Notwithstanding any other provision of this section,
193	193	the association may pay losses in excess of premium and other
194	194	revenue of the association with reinsurance proceeds from
195	195	reinsurance purchased by the association. [Subdivisions (1), (2),
196	196	and (3) shall be assessed against members of the association, as
197	197	provided by Subsection (b).
198	198	[(b) The proportion of the losses allocable to each insurer
199	199	under Subsections (a)(1), (3), and (4) shall be determined in the
200	200	manner used to determine each insurer's participation in the
201	201	association for the year under Section 2210.052.
202	202	[(c) An insurer may credit an amount paid in accordance with
203	203	Subsection (a)(4) in a calendar year against the insurer's premium
204	204	tax under Chapter 221. The tax credit authorized under this
205	205	subsection shall be allowed at a rate not to exceed 20 percent per
206	206	year for five or more successive years beginning the calendar year
207	207	that the assessments under this section are paid. The balance of
208	208	payments made by the insurer and not claimed as a premium tax credit
209	209	may be reflected in the books and records of the insurer as an
210	210	admitted asset of the insurer for all purposes, including
211	211	exhibition in an annual statement under Section 862.001.]
212	212	SECTION 8. Section 2210.060(c), Insurance Code, is amended
213	213	to read as follows:
214	214	(c) Subsection (a) does not authorize the association to
215	215	indemnify a member of the association for participating in the
216	216	assessments made by [writings, expenses, profits, and losses of]
217	217	the association in the manner provided by this chapter.
218	218	SECTION 9. Subchapter B, Chapter 2210, Insurance Code, is
219	219	amended by adding Section 2210.061 to read as follows:
220	220	Sec. 2210.061. ELIGIBLE SURPLUS LINES INSURERS. (a) An
221	221	eligible surplus lines insurer may not be a member of the
222	222	association and is not subject to assessment as a member of the
223	223	association.
224	224	(b) Each surplus lines agent placing property insurance
225	225	through an eligible surplus lines insurer shall collect from the
226	226	policyholder and shall remit to the association a surplus lines
227	227	policy fee on all premiums collected after January 1, 2010, for all
228	228	insurance written by the surplus lines agent for a policy from an
229	229	eligible surplus lines insurer for all risks on real property and
230	230	contents in first tier coastal counties. By procuring or selling
231	231	insurance on property in this state through an eligible surplus
232	232	lines insurer, each surplus lines agent described by this
233	233	subsection agrees to be subject to the provisions of this chapter,
234	234	and to collect and remit the surplus lines policy fee described by
235	235	this section.
236	236	(c) The surplus lines policy fee shall be five percent of
237	237	the total policy premium, but the fee may not be considered premium
238	238	and is not subject to premium taxes or commissions. Failure to pay
239	239	the surplus lines policy fee shall be treated as a failure to pay
240	240	premium. For purposes of this subsection, "total policy premium"
241	241	includes taxes and commissions.
242	242	(d) Not later than the 20th day after the last day of each
243	243	calendar quarter, each surplus lines agent placing insurance
244	244	through an eligible surplus lines insurer shall remit directly to
245	245	the association all surplus lines policy fees collected in the
246	246	preceding quarter.
247	247	SECTION 10. The heading to Subchapter C, Chapter 2210,
248	248	Insurance Code, is amended to read as follows:
249	249	SUBCHAPTER C. ASSOCIATION BOARD OF DIRECTORS; GENERAL POWERS AND
250	250	DUTIES OF BOARD OF DIRECTORS
251	251	SECTION 11. Section 2210.101, Insurance Code, is amended to
252	252	read as follows:
253	253	Sec. 2210.101. ACCOUNTABLE TO GOVERNOR AND COMMISSIONER.
254	254	The board of directors is responsible and accountable to the
255	255	governor and the commissioner.
256	256	SECTION 12. Section 2210.102, Insurance Code, is amended to
257	257	read as follows:
258	258	Sec. 2210.102. COMPOSITION. (a) The board of directors is
259	259	composed of seven [the following nine] members appointed by the
260	260	governor in accordance with this section.
261	261	(b) Three members must be employed by or affiliated with,
262	262	other than as agents, [:
263	263	[(1) five representatives of different] insurers who
264	264	are members of the association.
265	265	(c) Two members must be [, elected by the members as
266	266	provided by the plan of operation;
267	267	[(2) two] public representatives, one of whom [who are
268	268	nominated by the office of public insurance counsel and who], as of
269	269	the date of the appointment, resides [:
270	270	[(A) reside] in or owns property in the seacoast
271	271	territory, and one of whom, as of the date of the appointment, does
272	272	not reside in or own property in the seacoast territory.
273	273	(d) At least two members must be, but not more than two
274	274	members may be, general [a catastrophe area; and
275	275	[(B) are policyholders of the association; and
276	276	[(3) two] property and casualty agents or personal
277	277	lines property and casualty agents licensed under this code, one of
278	278	whom, as of the date of the appointment, maintains the agent's
279	279	principal office in the seacoast territory, and one of whom, as of
280	280	the date of the appointment, does not maintain the agent's
281	281	principal office in the seacoast territory.
282	282	(e) All members must [, each of whom must:
283	283	[(A)] have demonstrated experience in insurance,
284	284	general business, or actuarial principles sufficient to make the
285	285	success of the association probable [;
286	286	[(B) maintain the agent's principal office, as of
287	287	the date of the appointment, in a catastrophe area; and
288	288	[(C) hold a license under Chapter 4051 as a
289	289	general property and casualty agent or a personal lines property
290	290	and casualty agent.
291	291	[(b) The persons appointed under Subsections (a)(2) and (3)
292	292	must be from different counties].
293	293	SECTION 13. Section 2210.103, Insurance Code, is amended to
294	294	read as follows:
295	295	Sec. 2210.103. TERMS. (a) Members of the board of
296	296	directors serve two-year [three-year staggered] terms[, with the
297	297	terms of three members expiring on the third Tuesday of March of
298	298	each year].
299	299	(b) A person may serve on the board of directors for not more
300	300	than three consecutive full terms[, not to exceed nine years].
301	301	(c) The governor shall appoint a replacement in the manner
302	302	provided by Section 2210.102 for a member who leaves or is removed
303	303	from the board of directors.
304	304	SECTION 14. Section 2210.104, Insurance Code, is amended to
305	305	read as follows:
306	306	Sec. 2210.104. OFFICERS. The board of directors shall
307	307	elect from the board's membership an executive committee consisting
308	308	of a presiding officer, assistant presiding officer, and
309	309	secretary-treasurer. [At least one of the officers must be a member
310	310	appointed under Section 2210.102(a)(2) or (3).]
311	311	SECTION 15. Subchapter C, Chapter 2210, Insurance Code, is
312	312	amended by adding Section 2210.1051 to read as follows:
313	313	Sec. 2210.1051. MEETINGS THROUGH TELECOMMUNICATION
314	314	METHODS. (a) Notwithstanding Chapter 551, Government Code, or any
315	315	other law, members of the board of directors may meet by telephone
316	316	conference call, videoconference, or other similar
317	317	telecommunication method. The board may use telephone conference
318	318	call, videoconference, or other similar telecommunication method
319	319	for purposes of establishing a quorum or voting or for any other
320	320	meeting purpose in accordance with this subsection and Subsection
321	321	(b). This subsection applies without regard to the subject matter
322	322	discussed or considered by the members of the board at the meeting.
323	323	(b) A meeting held by telephone conference call,
324	324	videoconference, or other similar telecommunication method:
325	325	(1) is subject to the notice requirements applicable
326	326	to other meetings of the board of directors;
327	327	(2) may not be held unless notice of the meeting
328	328	specifies the location of the meeting;
329	329	(3) must be audible to the public at the location
330	330	specified in the notice under Subdivision (2); and
331	331	(4) must provide two-way audio communication between
332	332	all members of the board attending the meeting during the entire
333	333	meeting, and if the two-way audio communication link with members
334	334	attending the meeting is disrupted so that a quorum of the board is
335	335	no longer participating in the meeting, the meeting may not
336	336	continue until the two-way audio communication link is
337	337	reestablished.
338	338	SECTION 16. Subchapter C, Chapter 2210, Insurance Code, is
339	339	amended by adding Section 2210.107 to read as follows:
340	340	Sec. 2210.107. PRIMARY BOARD OBJECTIVES. The primary
341	341	objectives of the board of directors are to ensure that the
342	342	association:
343	343	(1) operates in accordance with this chapter and
344	344	commissioner rules;
345	345	(2) complies with sound insurance principles; and
346	346	(3) meets the solvency standards imposed under this
347	347	chapter.
348	348	SECTION 17. Section 2210.151, Insurance Code, is amended to
349	349	read as follows:
350	350	Sec. 2210.151. ADOPTION OF PLAN OF OPERATION. With the
351	351	advice of the board of directors, the commissioner by rule shall
352	352	adopt the plan of operation to provide[:
353	353	[(1)] Texas windstorm and hail insurance in a
354	354	catastrophe area[; and
355	355	[(2) Texas fire and explosion insurance in an
356	356	inadequate fire insurance area].
357	357	SECTION 18. Section 2210.202(a), Insurance Code, is amended
358	358	to read as follows:
359	359	(a) A person who has an insurable interest in insurable
360	360	property may apply to the association for insurance coverage
361	361	provided under the plan of operation and an inspection of the
362	362	property, subject to any rules [, including any inspection fee,]
363	363	established by the board of directors and approved by the
364	364	commissioner. In order to be eligible for insurance through the
365	365	association, an applicant must demonstrate, in the manner
366	366	established in the plan of operation, inability to obtain insurance
367	367	coverage from insurers authorized to engage in the business of
368	368	property and casualty insurance in this state.
369	369	SECTION 19. Section 2210.203, Insurance Code, is amended by
370	370	adding Subsection (a-1) to read as follows:
371	371	(a-1) Notwithstanding Subsection (a), if all or any part of
372	372	the property for which an application for new or renewal insurance
373	373	coverage is made is located in Zone V or another similar zone with
374	374	an additional hazard associated with storm waves, as defined by the
375	375	National Flood Insurance Program, and if flood insurance under that
376	376	federal program is available, the association may not issue a new or
377	377	renewal insurance policy unless evidence that the property is
378	378	covered by a flood insurance policy is submitted to the
379	379	association. If that flood insurance is unavailable in any portion
380	380	of the seacoast territory, an association policy insuring a
381	381	residential structure described by Section 2210.004(g) is subject
382	382	to a premium surcharge for the insurance coverage obtained through
383	383	the association in an amount equal to not less than 10 percent of
384	384	the premium, as set by the commissioner after notice and a hearing.
385	385	SECTION 20. Subchapter E, Chapter 2210, Insurance Code, is
386	386	amended by adding Section 2210.210 to read as follows:
387	387	Sec. 2210.210. NOTICE TO APPLICANTS FOR INSURANCE AND
388	388	POLICYHOLDERS; CONSUMER INFORMATION. (a) Each application for
389	389	insurance and each policy issued by the association must include a
390	390	notice as provided by this section. The commissioner by rule may
391	391	prescribe specific requirements for the notice. The notice must be
392	392	substantially as follows:
393	393	IMPORTANT NOTICE TO TEXAS WINDSTORM INSURANCE
394	394	ASSOCIATION POLICYHOLDERS
395	395	Insurance policies issued by the Texas Windstorm Insurance
396	396	Association are not guaranteed by the state or federal government.
397	397	In the event of a major catastrophe, the association may not have
398	398	sufficient funding resources to pay all losses to all policyholders
399	399	suffering damage. In such an event, you may be paid less than the
400	400	full amount of damages that you suffer. You may obtain additional
401	401	information as to the association's potential exposure and its
402	402	available funding resources at www.tdi.state.tx.us.
403	403	(b) The department shall establish a link on the
404	404	department's Internet website through which applicants for
405	405	insurance coverage through the association and association
406	406	policyholders may obtain information in a format easily understood
407	407	about the association's exposure and available resources.
408	408	SECTION 21. Sections 2210.251(a) through (f), Insurance
409	409	Code, are amended to read as follows:
410	410	(a) Except as provided by this section, to be considered
411	411	insurable property eligible for windstorm and hail insurance
412	412	coverage from the association, a structure that is constructed or
413	413	repaired or to which additions are made on or after January 1, 1988,
414	414	must be inspected [or approved] by the association [department] for
415	415	compliance with the plan of operation.
416	416	(b) After January 1, 2004, for geographic areas specified by
417	417	the commissioner, the board of directors [commissioner by rule]
418	418	shall recognize for the purposes of this chapter [adopt] the 2003
419	419	International Residential Code for one- and two-family dwellings
420	420	published by the International Code Council. For those geographic
421	421	areas, the board of directors [commissioner by rule] may recognize
422	422	[adopt] a subsequent edition of that code and [may adopt] any
423	423	supplements published by the International Code Council and
424	424	amendments to that code.
425	425	(c) After January 1, 2004, a person must submit a notice of a
426	426	windstorm inspection to the association [unit responsible for
427	427	certification of windstorm inspections at the department] before
428	428	beginning to construct, alter, remodel, enlarge, or repair a
429	429	structure.
430	430	(d) A structure constructed or repaired or to which
431	431	additions were made before January 1, 1988, that is located in an
432	432	area that was governed at the time of the construction, repair, or
433	433	addition by a building code recognized by the association is
434	434	insurable property eligible for windstorm and hail insurance
435	435	coverage from the association without compliance with the
436	436	inspection [or approval] requirements of this section or the plan
437	437	of operation.
438	438	(e) A structure constructed or repaired or to which
439	439	additions were made before January 1, 1988, that is located in an
440	440	area not governed by a building code recognized by the association
441	441	is insurable property eligible for windstorm and hail insurance
442	442	coverage from the association without compliance with the
443	443	inspection [or approval] requirements of this section or the plan
444	444	of operation if the structure was previously insured by an insurer
445	445	authorized to engage in the business of insurance in this state and
446	446	the structure is in essentially the same condition as when
447	447	previously insured, except for normal wear and tear, and is without
448	448	any structural change other than a change made according to code.
449	449	For purposes of this subsection, evidence of previous insurance
450	450	coverage includes:
451	451	(1) a copy of a previous insurance policy;
452	452	(2) copies of canceled checks or agent's records that
453	453	show payments for previous policies; and
454	454	(3) a copy of the title to the structure or mortgage
455	455	company records that show previous policies.
456	456	(f) The association [department] shall issue a certificate
457	457	of compliance for each structure that qualifies for coverage. The
458	458	certificate is evidence of insurability of the structure by the
459	459	association.
460	460	SECTION 22. Section 2210.252, Insurance Code, is amended to
461	461	read as follows:
462	462	Sec. 2210.252. INTERNATIONAL RESIDENTIAL CODE BUILDING
463	463	SPECIFICATIONS. (a) After January 1, 2004, for geographic areas
464	464	specified by the commissioner, the association [commissioner by
465	465	rule] may supplement the plan of operation building specifications
466	466	with the structural provisions of the International Residential
467	467	Code for one- and two-family dwellings, as published by the
468	468	International Code Council or an analogous entity recognized by the
469	469	board of directors [department].
470	470	(b) For a geographic area specified under Subsection (a),
471	471	the board of directors [commissioner by rule] may recognize [adopt]
472	472	a subsequent edition of the International Residential Code for
473	473	one- and two-family dwellings and [may adopt] a supplement
474	474	published by the International Code Council or an amendment to that
475	475	code.
476	476	SECTION 23. Sections 2210.254(a) and (b), Insurance Code,
477	477	are amended to read as follows:
478	478	(a) For purposes of this chapter, a "qualified inspector"
479	479	includes:
480	480	(1) a person determined by the board of directors
481	481	[department] to be qualified because of training or experience to
482	482	perform building inspections;
483	483	(2) a licensed professional engineer who meets the
484	484	requirements specified by the board of directors [commissioner
485	485	rule] for appointment to conduct windstorm inspections; and
486	486	(3) an inspector who:
487	487	(A) is certified by the International Code
488	488	Council, the Building Officials and Code Administrators
489	489	International, Inc., the International Conference of Building
490	490	Officials, or the Southern Building Code Congress International,
491	491	Inc.;
492	492	(B) has certifications as a buildings inspector
493	493	and coastal construction inspector; and
494	494	(C) complies with other requirements specified
495	495	by the board of directors [commissioner rule].
496	496	(b) A windstorm inspection may be performed only by a
497	497	qualified inspector who is employed by or under contract with the
498	498	association.
499	499	SECTION 24. Section 2210.255, Insurance Code, is amended to
500	500	read as follows:
501	501	Sec. 2210.255. APPOINTMENT OF LICENSED ENGINEER AS
502	502	INSPECTOR. (a) On request of an engineer licensed by the Texas
503	503	Board of Professional Engineers, the association may [commissioner
504	504	shall] appoint the engineer as an inspector under this subchapter
505	505	on receipt of information satisfactory to the board of directors
506	506	[not later than the 10th day after the date the engineer delivers to
507	507	the commissioner information demonstrating] that the engineer is
508	508	qualified to perform windstorm inspections under this subchapter.
509	509	(b) The board of directors shall consult with the
510	510	commissioner regarding [shall adopt rules establishing] the
511	511	information to be considered in appointing engineers under this
512	512	section.
513	513	SECTION 25. Subchapter F, Chapter 2210, Insurance Code, is
514	514	amended by adding Section 2210.258 to read as follows:
515	515	Sec. 2210.258. SURCHARGE FOR CERTAIN NONCOMPLIANT
516	516	CONSTRUCTION. (a) For purposes of this section, property is not in
517	517	compliance with mandatory building codes if:
518	518	(1) the property has not been inspected for compliance
519	519	with the plan of operation in accordance with Section 2210.251(a);
520	520	or
521	521	(2) a certificate of compliance has not been issued in
522	522	accordance with Section 2210.251(f).
523	523	(b) An applicant for coverage from the association or a
524	524	policyholder of the association whose property is determined to not
525	525	be in compliance as provided by Subsection (a) is subject to a
526	526	premium surcharge for insurance coverage obtained through the
527	527	association. The surcharge shall be an amount not less than an
528	528	amount equal to 10 percent of the premium, as determined by the
529	529	commissioner after notice and a hearing.
530	530	SECTION 26. Sections 2210.351(a), (c), and (d), Insurance
531	531	Code, are amended to read as follows:
532	532	(a) The association shall [must] file with the department in
533	533	the manner prescribed by Section 2251.101 each manual of
534	534	classifications, rules, rates, including condition charges, and
535	535	each rating plan, and each modification of those items that the
536	536	association proposes to use.
537	537	(c) After the filing has been made, the association may use
538	538	a filed rate, and a filed rate is subject to disapproval by the
539	539	commissioner in the manner prescribed by Subchapter C, Chapter
540	540	2251. [As soon as reasonably possible after the filing has been
541	541	made, the commissioner in writing shall approve, modify, or
542	542	disapprove the filing. A filing is considered approved unless
543	543	modified or disapproved on or before the 30th day after the date of
544	544	the filing.]
545	545	(d) If at any time the commissioner determines that a filing
546	546	in effect [approved] under Subsection (c) no longer meets the
547	547	requirements of this chapter, the commissioner may disapprove [,
548	548	after a hearing held on at least 20 days' notice to the association
549	549	that specifies the matters to be considered at the hearing, issue an
550	550	order withdrawing approval of] the filing in the manner prescribed
551	551	by Section 2251.104 for disapproval of a rate. [The order must
552	552	specify in what respects the commissioner determines that the
553	553	filing no longer meets the requirements of this chapter. An order
554	554	issued under this subsection may not take effect before the 30th day
555	555	after the date of issuance of the order.]
556	556	SECTION 27. Sections 2210.355(b) and (g), Insurance Code,
557	557	are amended to read as follows:
558	558	(b) In adopting rates under this chapter, the association
559	559	shall:
560	560	(1) comply with the rate standards adopted under
561	561	Section 2251.052, to the extent that those standards are determined
562	562	by the commissioner to be applicable to the purposes of the
563	563	association;
564	564	(2) ensure that the rates are actuarially sound; and
565	565	(3) include rating factors as necessary to:
566	566	(A) fund the catastrophe reserve trust fund;
567	567	(B) pay any public security obligations in
568	568	accordance with Subchapter M; and
569	569	(C) pay all losses and expenses of the
570	570	association, regardless of the ultimate source of funding for those
571	571	losses and expenses [following must be considered:
572	572	[(1) the past and prospective loss experience within
573	573	and outside this state of hazards for which insurance is made
574	574	available through the plan of operation, if any;
575	575	[(2) expenses of operation, including acquisition
576	576	costs;
577	577	[(3) a reasonable margin for profit and contingencies;
578	578	and
579	579	[(4) all other relevant factors, within and outside
580	580	this state].
581	581	(g) A commission paid to an agent for a windstorm and hail
582	582	insurance policy from the association must be reasonable, adequate,
583	583	not unfairly discriminatory, and nonconfiscatory. The commission
584	584	may not exceed 10 percent of the premium amount for the policy, with
585	585	a refund required for any unearned portion of the premium.
586	586	SECTION 28. Section 2210.356, Insurance Code, is amended by
587	587	amending Subsection (b) and adding Subsection (b-1) to read as
588	588	follows:
589	589	(b) The catastrophe element used to develop rates under this
590	590	subchapter [applicable to risks written by the association must be
591	591	uniform throughout the seacoast territory. The catastrophe element
592	592	of the rates] must be developed using industry data, association
593	593	data, and catastrophe models approved by the department for use in
594	594	association filings[:
595	595	[(1) 90 percent of both the monoline extended coverage
596	596	loss experience and related premium income for all insurers, other
597	597	than the association, for covered property located in the seacoast
598	598	territory, using not less than the most recent 30 years of
599	599	experience available; and
600	600	[(2) 100 percent of both the loss experience and
601	601	related premium income for the association for covered property,
602	602	using not less than the most recent 30 years of experience
603	603	available].
604	604	(b-1) The commissioner shall adopt rules establishing:
605	605	(1) the procedure for approval by the department of
606	606	catastrophe models used by the association in the development of
607	607	its rates; and
608	608	(2) the methodology of use for those models.
609	609	SECTION 29. Subchapter H, Chapter 2210, Insurance Code, is
610	610	amended by adding Section 2210.364 to read as follows:
611	611	Sec. 2210.364. REVIEW OF RATES. A person who is aggrieved
612	612	by a rate under this subchapter may proceed as provided by Chapter
613	613	2251.
614	614	SECTION 30. Sections 2210.452(a), (c), and (d), Insurance
615	615	Code, are amended to read as follows:
616	616	(a) The commissioner shall adopt rules under which the
617	617	association makes [members relinquish their net equity on an annual
618	618	basis as provided by those rules by making] payments to the
619	619	catastrophe reserve trust fund. The trust fund may be used only to
620	620	fund[:
621	621	[(1)] the obligations of the trust fund under Section
622	622	2210.058 [2210.058(a); and
623	623	[(2) the mitigation and preparedness plan established
624	624	under Section 2210.454 to reduce the potential for payments by
625	625	association members that give rise to tax credits in the event of
626	626	loss].
627	627	(c) At the end of each calendar year or policy year, the
628	628	association shall pay the net gain from operations [equity] of the
629	629	association [a member], including all premium and other revenue of
630	630	the association in excess of incurred losses and operating
631	631	expenses, to the trust fund or a reinsurance program approved by the
632	632	commissioner.
633	633	(d) The commissioner by rule shall establish the procedure
634	634	relating to the disbursement of money from the trust fund to
635	635	policyholders in the event of an occurrence or series of
636	636	occurrences within a catastrophe area that results in a
637	637	disbursement under Section 2210.058 [2210.058(a)].
638	638	SECTION 31. Section 2210.453, Insurance Code, is amended to
639	639	read as follows:
640	640	Sec. 2210.453. REINSURANCE PROGRAM. (a) The association may
641	641	[shall]:
642	642	(1) make payments into the trust fund; and [or]
643	643	(2) purchase [establish a] reinsurance as part of the
644	644	association's annual operating expenses to the extent [program]
645	645	approved by the commissioner [department].
646	646	(b) With the approval of the commissioner [department], the
647	647	association may purchase [establish a] reinsurance [program] that
648	648	operates in addition to or in concert with the trust fund and with
649	649	public securities and assessments authorized by this chapter.
650	650	SECTION 32. Section 2210.454(b), Insurance Code, is amended
651	651	to read as follows:
652	652	(b) Each state fiscal year, the department may fund the
653	653	mitigation and preparedness plan using available funds [the
654	654	investment income of the trust fund in an amount not less than $1
655	655	million and not more than 10 percent of the investment income of the
656	656	prior fiscal year. From that amount and as part of that plan, the
657	657	department may use in each fiscal year $1 million for the windstorm
658	658	inspection program established under Section 2210.251].
659	659	SECTION 33. Section 2210.504(b), Insurance Code, is amended
660	660	to read as follows:
661	661	(b) Notwithstanding Subsection (a) and Sections
662	662	2210.501(c), 2210.502(a) and (b) [2210.502(a)-(c)], and 2210.503,
663	663	the commissioner may not approve adjustments of maximum liability
664	664	limits to amounts lower than the amounts prescribed under Section
665	665	2210.501(b).
666	666	SECTION 34. Section 2210.551, Insurance Code, is amended by
667	667	adding Subsection (a-1) and amending Subsections (c) and (d) to
668	668	read as follows:
669	669	(a-1) This section does not apply to a matter subject to
670	670	Section 2210.364.
671	671	(c) If the association or any interested party is aggrieved
672	672	by the action of the commissioner with respect to a ruling, order,
673	673	or determination of the commissioner, the association or interested
674	674	party may, not later than the 30th day after the date of the action,
675	675	make a written request to the commissioner for a hearing on the
676	676	action.
677	677	(d) On 10 days' written notice of the time and place of the
678	678	hearing, the commissioner shall conduct a hearing on the
679	679	[association's] request of the association or interested party or
680	680	the appeal from an act, ruling, or decision of the association, not
681	681	later than the 30th day after the date of receipt of the request or
682	682	appeal.
683	683	SECTION 35. Chapter 2210, Insurance Code, is amended by
684	684	adding Subchapters M and N to read as follows:
685	685	SUBCHAPTER M. PUBLIC SECURITIES PROGRAM
686	686	Sec. 2210.601. PURPOSE. The legislature finds that issuing
687	687	public securities to provide a method to raise funds to provide
688	688	windstorm and hail insurance through the association in certain
689	689	designated areas of the state is to benefit the public and to
690	690	further a public purpose.
691	691	Sec. 2210.602. DEFINITIONS. In this subchapter:
692	692	(1) "Board" means the board of directors of the Texas
693	693	Public Finance Authority.
694	694	(2) "Catastrophe area public security" means public
695	695	securities authorized to be issued before or on or after the
696	696	occurrence of a catastrophic event by Section 2210.058(c).
697	697	(3) "Class 1 public securities" means public
698	698	securities authorized to be issued before or on or after the
699	699	occurrence of a catastrophic event by Section 2210.058(d).
700	700	(4) "Class 2 public securities" means public
701	701	securities authorized to be issued on or after the occurrence of a
702	702	catastrophic event by Section 2210.058(f).
703	703	(5) "Credit agreement" has the meaning assigned by
704	704	Chapter 1371, Government Code.
705	705	(6) "Credit agreement obligation" means any premium,
706	706	periodic payment, termination payment, or similar obligation under
707	707	a credit agreement.
708	708	(7) "Insurer" means each property and casualty insurer
709	709	authorized to engage in the business of property and casualty
710	710	insurance in this state. The term specifically includes a county
711	711	mutual insurance company, a Lloyd's plan, and a reciprocal or
712	712	interinsurance exchange.
713	713	(8) "Member company public security" means public
714	714	securities authorized to be issued after the occurrence of a
715	715	catastrophic event by Section 2210.058(e).
716	716	(9) "Public security" means a debt instrument or other
717	717	public security obligation issued by the Texas Public Finance
718	718	Authority for the purposes described by this subchapter and any
719	719	credit agreement.
720	720	(10) "Public security administrative expenses" means
721	721	expenses incurred in issuing and administering public securities
722	722	issued under this subchapter, including insurance costs and fees
723	723	for paying agents, trustees, and attorneys, and for other
724	724	professional services necessary to ensure compliance with
725	725	applicable state or federal law.
726	726	(11) "Public security obligations" means the
727	727	principal, any premium, and interest on a public security, periodic
728	728	payments or termination payments, or similar obligations with
729	729	respect to a public security.
730	730	(12) "Public security obligation revenue fund" means
731	731	the dedicated trust fund established by the association outside the
732	732	state treasury under this subchapter.
733	733	(13) "Public security resolution" means the
734	734	resolution or order authorizing public securities to be issued
735	735	under this subchapter.
736	736	Sec. 2210.603. APPLICABILITY OF OTHER LAWS. The board
737	737	shall issue public securities under this subchapter in accordance
738	738	with and subject to the requirements of Chapter 1232, Government
739	739	Code, and other provisions of Title 9, Government Code, that apply
740	740	to issuance of a public security by a state agency. In the event of
741	741	a conflict, this subchapter controls.
742	742	Sec. 2210.604. ISSUANCE OF PUBLIC SECURITIES AUTHORIZED.
743	743	(a) At the request of the board of directors of the association and
744	744	with the approval of the commissioner, the board shall issue public
745	745	securities to:
746	746	(1) fund the association, including funding necessary
747	747	to:
748	748	(A) establish and maintain reserves to pay
749	749	claims;
750	750	(B) pay incurred claims;
751	751	(C) pay operating expenses; and
752	752	(D) purchase reinsurance;
753	753	(2) provide a reserve fund for the public securities;
754	754	(3) capitalize interest for the period determined by
755	755	the association, not to exceed two years;
756	756	(4) pay public security administrative expenses; and
757	757	(5) pay other costs related to the public securities
758	758	as may be determined by the board.
759	759	(b) The board may issue, on behalf of the association,
760	760	public securities in an amount sufficient to fund the insured
761	761	losses and operating expenses of the association as determined by
762	762	the association and approved by the commissioner after at least 10
763	763	days' notice and a hearing if a hearing is requested by any person
764	764	within the 10-day notice period.
765	765	Sec. 2210.605. TERMS OF ISSUANCE. (a) The board shall
766	766	determine the method of sale, type and form of public security,
767	767	maximum interest rates, and other terms of the public securities
768	768	that, in the board's judgment, best achieve the goals of the
769	769	association and effect the borrowing at the lowest practicable
770	770	cost. The board may enter into a credit agreement in connection
771	771	with the public securities.
772	772	(b) Public securities must include the name of the
773	773	association.
774	774	Sec. 2210.606. CONTENTS OF PUBLIC SECURITY RESOLUTION;
775	775	ADMINISTRATION OF ACCOUNTS. (a) In a public security resolution,
776	776	the board may:
777	777	(1) provide for the flow of funds and the
778	778	establishment, maintenance, and investment of funds and special
779	779	accounts with regard to the public securities; and
780	780	(2) make additional covenants with respect to the
781	781	public securities and the designated income and receipts of the
782	782	association pledged to the payment of the public securities.
783	783	(b) The association shall administer the accounts in
784	784	accordance with this subchapter.
785	785	Sec. 2210.607. PUBLIC SECURITY PROCEEDS. (a) The proceeds
786	786	of public securities may be deposited with a trustee selected by the
787	787	association in consultation with the commissioner or if no trustee
788	788	is selected, held by the comptroller in a dedicated trust fund
789	789	outside the state treasury in the custody of the comptroller.
790	790	(b) Any excess public security proceeds remaining after the
791	791	purposes for which the public securities were issued are satisfied
792	792	may be used to pay public security obligations or administrative
793	793	expenses or pay, purchase, defease, or redeem outstanding public
794	794	securities. If there are no outstanding public security obligations
795	795	or public security administrative expenses, the excess proceeds
796	796	shall be transferred to the catastrophe reserve trust fund.
797	797	Sec. 2210.608. SOURCE OF PAYMENT; REVENUE FUND. (a) Public
798	798	security obligations are payable only from the public security
799	799	obligation revenue fund, into which the following are deposited:
800	800	(1) the service fees on assessments established under
801	801	Section 2210.611, 2210.612, 2210.613, or 2210.614, as applicable;
802	802	or
803	803	(2) other amounts that the association is authorized
804	804	to levy, charge, and collect.
805	805	(b) The board shall notify the association of the estimated
806	806	amount of public security administrative expenses and the amount of
807	807	the public security obligations each year in a period sufficient,
808	808	as determined by the association, to permit the association to
809	809	determine the availability of funds and assess a premium surcharge
810	810	or other assessment if necessary.
811	811	(c) The association shall deposit all revenue collected
812	812	under Sections 2210.611 through 2210.614 in the public security
813	813	obligation revenue fund. Money deposited in the fund may be
814	814	invested as permitted by general law. Money in the fund required to
815	815	be used to pay public security administrative expenses and public
816	816	security obligations shall be transferred to the appropriate funds
817	817	in the manner and at the time specified in the public security
818	818	resolution to ensure timely payment of obligations and expenses.
819	819	(d) The association shall provide for the payment of the
820	820	public security administrative expenses and the public security
821	821	obligations by irrevocably pledging revenues received from
822	822	assessments, premiums, premium surcharges, and amounts on deposit
823	823	in the public security obligation revenue fund, together with any
824	824	reserve fund, as provided in the public security resolution and
825	825	amounts realized under related credit agreements.
826	826	(e) Revenue deposited into the public security obligation
827	827	revenue fund that exceeds the amount of the public security
828	828	obligations payable in that year and interest earned on the public
829	829	security obligation fund may, in the discretion of the association,
830	830	be:
831	831	(1) used to pay public security obligations payable in
832	832	the subsequent year, offsetting the amount of the premium surcharge
833	833	or assessment that would otherwise be required to be levied for the
834	834	year under this subchapter;
835	835	(2) used to redeem, purchase, or defease outstanding
836	836	public securities; or
837	837	(3) deposited in the catastrophe reserve trust fund.
838	838	(f) The public securities are obligations solely of the
839	839	association and do not create a pledge, gift, or loan of the faith,
840	840	credit, or taxing authority of this state.
841	841	(g) Each public security must:
842	842	(1) include a statement that the state is not
843	843	obligated to pay any amount on the security and that the faith,
844	844	credit, and taxing authority of this state are not pledged, given,
845	845	or lent to those payments; and
846	846	(2) state on the security's face that the security:
847	847	(A) is payable solely from the revenue pledged
848	848	for that purpose; and
849	849	(B) is not and may not constitute a legal or moral
850	850	obligation of the state.
851	851	Sec. 2210.609. PAYMENT OF INTEREST; PAYMENT OF PRE-EVENT
852	852	PUBLIC SECURITY OBLIGATIONS. (a) Except as provided by
853	853	Subsection (b), the association shall pay all interest, and may pay
854	854	principal, on any pre-event public security issued as described by
855	855	Section 2210.058(c) or (d) from the existing premiums of the
856	856	association.
857	857	(b) If the association is unable to pay the public security
858	858	obligations described by Subsection (a) with existing premiums,
859	859	those public security obligations shall be paid from the service
860	860	fees collected in accordance with Sections 2210.611 and 2210.612.
861	861	Sec. 2210.610. REFINANCING PUBLIC SECURITIES. The
862	862	association may request the board to refinance any public
863	863	securities issued in accordance with Section 2210.058, whether
864	864	pre-event or post-event public securities, with the refinanced
865	865	public securities payable from the same sources as the original
866	866	public securities.
867	867	Sec. 2210.611. CATASTROPHE AREA PUBLIC SECURITY SERVICE
868	868	FEE; PREMIUM SURCHARGE AND ASSESSMENT. (a) The catastrophe area
869	869	public security obligations and administrative expenses shall be
870	870	serviced as provided by this section.
871	871	(b) For public securities, the proceeds of which are used to
872	872	fund excess losses under Section 2210.058(c), the public security
873	873	obligations and administrative expenses shall be collected from
874	874	association policyholders each year until all outstanding public
875	875	security obligations and administrative expenses have been
876	876	satisfied and paid.
877	877	(c) The service fee imposed on association policyholders
878	878	under this section shall be determined and collected as provided by
879	879	this subsection. The association shall determine the amount of a
880	880	service fee imposed under this section at least annually. On
881	881	approval by the commissioner of the amount of a service fee after at
882	882	least 10 days' notice and a hearing, if a hearing is requested by
883	883	any person within the 10-day notice period, the association shall
884	884	charge the service fee to its policyholders. The service fee must
885	885	be set in an amount sufficient to pay all public security
886	886	obligations and administrative expenses. The service fee shall be
887	887	collected in the form of a premium surcharge and shall be remitted
888	888	to the association as required by the commissioner by rule. The
889	889	service fees collected under this subsection are separate charges
890	890	in addition to premiums collected and are not subject to premium
891	891	taxes or commissions. For purposes of policy cancellation, failure
892	892	by a policyholder to pay a premium surcharge imposed under this
893	893	subsection is equivalent to failure to pay premium.
894	894	Sec. 2210.612. SERVICE FEE: CLASS 1 PUBLIC SECURITIES;
895	895	PREMIUM SURCHARGE. (a) A fee to service Class 1 public securities
896	896	issued by the association in accordance with Section 2210.058(d)
897	897	shall be collected by each insurer, the association, and the FAIR
898	898	Plan Association from policyholders who reside or have operations
899	899	in, or whose insured property is located in, a catastrophe area.
900	900	(b) The association shall determine the amount of a service
901	901	fee imposed under Subsection (a) at least annually.
902	902	(c) On approval by the commissioner after at least 10 days'
903	903	notice and a hearing, if a hearing is requested by any person within
904	904	the 10-day notice period, each insurer, the association, and the
905	905	FAIR Plan Association shall charge the service fee to the
906	906	policyholders described by Subsection (a). The service fee must be
907	907	set in an amount sufficient to pay all public security obligations
908	908	and administrative expenses. The service fee shall be collected in
909	909	the form of a premium surcharge and shall be remitted to the
910	910	association as required by the commissioner by rule.
911	911	(d) The premium surcharge shall apply to all insurance
912	912	policies for all property and casualty lines other than workers'
913	913	compensation, accident and health, and medical malpractice. The
914	914	service fees collected in the form of a premium surcharge under this
915	915	section are separate charges in addition to premiums collected and
916	916	are not subject to premium taxes or commissions.
917	917	(e) For purposes of policy cancellation, failure by a
918	918	policyholder to pay a premium surcharge imposed under this section
919	919	is equivalent to failure to pay premium.
920	920	Sec. 2210.613. POST-EVENT ASSESSMENT: MEMBER COMPANY
921	921	PUBLIC SECURITIES. (a) An assessment to service member company
922	922	public security obligations and administrative expenses issued by
923	923	the association after a catastrophic event shall be assessed to and
924	924	collected from each member company.
925	925	(b) The association shall determine the amount of each
926	926	member company assessment at least annually. The assessment must be
927	927	set in an amount sufficient to pay all public security obligations
928	928	and administrative expenses.
929	929	(c) Each member company shall be assessed with the
930	930	proportion of the loss allocable to each member company determined
931	931	in the same manner as its participation in the association has been
932	932	determined for the year under Section 2210.052.
933	933	Sec. 2210.614. POST-EVENT SERVICE FEE: CLASS 2 PUBLIC
934	934	SECURITIES; PREMIUM SURCHARGE. (a) A fee to service Class 2 public
935	935	securities issued by the association after a catastrophic event
936	936	shall be collected by each insurer, the association, and the FAIR
937	937	Plan Association from policyholders who reside or have operations
938	938	in, or whose insured property is located in, this state.
939	939	(b) The association shall determine the amount of a service
940	940	fee imposed under Subsection (a) at least annually.
941	941	(c) On approval by the commissioner after at least 10 days'
942	942	notice and a hearing, if a hearing is requested by any person within
943	943	the 10-day notice period, each insurer, the association, and the
944	944	FAIR Plan Association shall charge the service fee to the
945	945	policyholders described by Subsection (a). The service fee must be
946	946	set in an amount sufficient to pay all public security obligations
947	947	and administrative expenses. The service fee shall be collected in
948	948	the form of a premium surcharge and shall be remitted to the
949	949	association as required by the commissioner by rule.
950	950	(d) The premium surcharge shall apply to all insurance
951	951	policies for all property and casualty lines other than workers'
952	952	compensation, accident and health, and medical malpractice. The
953	953	service fees collected in the form of a premium surcharge under this
954	954	section are separate charges in addition to premiums collected and
955	955	are not subject to premium taxes or commissions.
956	956	(e) For purposes of policy cancellation, failure by a
957	957	policyholder to pay a premium surcharge imposed under this section
958	958	is equivalent to failure to pay premium.
959	959	Sec. 2210.615. EXEMPTION FROM TAXATION. Public securities
960	960	issued under this subchapter, any interest from those public
961	961	securities, and all assets pledged to secure the payment of the
962	962	public securities are free from taxation by the state or a political
963	963	subdivision of this state.
964	964	Sec. 2210.616. AUTHORIZED INVESTMENTS. Public securities
965	965	issued under this subchapter are authorized investments under
966	966	Subchapter B, Chapter 424, and Subchapters C and D, Chapter 425.
967	967	Sec. 2210.617. STATE PLEDGE REGARDING PUBLIC SECURITY OWNER
968	968	RIGHTS AND REMEDIES. (a) The state pledges to and agrees with the
969	969	owners of public securities issued in accordance with this
970	970	subchapter that the state will not limit or alter the rights vested
971	971	in the association to fulfill the terms of agreements made with the
972	972	owners or in any way impair the rights and remedies of those owners
973	973	until the public security obligations are fully discharged.
974	974	(b) The board may include the state's pledge and agreement
975	975	under Subsection (a) in a public security resolution.
976	976	Sec. 2210.618. PAYMENT ENFORCEABLE BY MANDAMUS. A writ of
977	977	mandamus from any Travis County district court and any other legal
978	978	or equitable remedy are available to a party in interest to require
979	979	the association or another party to fulfill an agreement or perform
980	980	a function or duty under:
981	981	(1) this subchapter;
982	982	(2) the Texas Constitution; or
983	983	(3) a public security resolution.
984	984	Sec. 2210.619. NO PERSONAL LIABILITY. The members of the
985	985	association, association employees, the board, the employees of the
986	986	Texas Public Finance Authority, the commissioner, and department
987	987	employees are not personally liable as a result of exercising the
988	988	rights and responsibilities granted under this subchapter.
989	989	SUBCHAPTER N. ASSOCIATION SOLVENCY REQUIREMENTS
990	990	Sec. 2210.651. SOLVENCY DUTIES. The board of directors
991	991	shall maintain the required solvency level of the association.
992	992	Sec. 2210.652. REQUIRED SOLVENCY LEVEL; FUNDING SOURCES.
993	993	(a) For purposes of this chapter, the "required solvency level" is
994	994	the level of available internal association funding necessary to
995	995	pay 100 percent of losses for which the association is liable and
996	996	that result from a probable maximum loss determined by the board of
997	997	directors under Section 2210.654.
998	998	(b) The board of directors shall maintain the funding of the
999	999	association at a level sufficient to achieve the required solvency
1000	1000	level.
1001	1001	(c) The association shall derive the funding to maintain the
1002	1002	required solvency level from a combination of:
1003	1003	(1) association reserves;
1004	1004	(2) available funds in the catastrophe reserve trust
1005	1005	fund;
1006	1006	(3) reinsurance purchased at any level;
1007	1007	(4) catastrophe area public securities under
1008	1008	Subchapter M; and
1009	1009	(5) Class 1 pre-event and post-event public securities
1010	1010	under Subchapter M, to be issued only as required in accordance with
1011	1011	Section 2210.058(d).
1012	1012	(d) As prescribed by Section 2210.058(d), Class 1 pre-event
1013	1013	and post-event public securities may not be used to achieve more
1014	1014	than 50 percent of the required solvency level.
1015	1015	Sec. 2210.653. CERTIFICATION; ANNUAL SOLVENCY REPORT. (a)
1016	1016	The board of directors shall certify to the governor, the
1017	1017	lieutenant governor, the speaker of the house of representatives,
1018	1018	and the commissioner, not later than April 15 of each calendar year,
1019	1019	that the required solvency level of the association is satisfied
1020	1020	for that calendar year.
1021	1021	(b) The board of directors shall make the certification in
1022	1022	the manner prescribed by commissioner rule.
1023	1023	(c) After calendar year 2010, in any calendar year, the
1024	1024	association may not issue any new coverage after April 15 if the
1025	1025	board of directors has not certified the required solvency level in
1026	1026	the annual solvency report. This subsection does not apply to
1027	1027	renewal of a policy issued through the association.
1028	1028	Sec. 2210.654. DETERMINATION OF PROBABLE MAXIMUM LOSS. (a)
1029	1029	Not later than April 1 of each calendar year, to establish the
1030	1030	required solvency level under Section 2210.652, the board of
1031	1031	directors shall determine the association's current probable
1032	1032	maximum loss, based on an average of at least two recognized
1033	1033	catastrophe models, as follows:
1034	1034	(1) for calendar years 2009 and 2010, at not less than
1035	1035	a one in 50 year occurrence;
1036	1036	(2) for calendar year 2011, at not less than a one in
1037	1037	75 year occurrence; and
1038	1038	(3) for each calendar year after calendar year 2011,
1039	1039	at not less than a one in 100 year occurrence.
1040	1040	(b) The board of directors must ensure the ability of the
1041	1041	association to generate funding sufficient to cover the probable
1042	1042	maximum loss without reliance on any member company public
1043	1043	securities or Class 2 post-event public securities under Subchapter
1044	1044	M.
1045	1045	SECTION 36. Section 2251.003, Insurance Code, is amended by
1046	1046	adding Subsection (a-1) to read as follows:
1047	1047	(a-1) Except as otherwise provided by Chapter 2210,
1048	1048	Subchapters B and C apply to the Texas Windstorm Insurance
1049	1049	Association.
1050	1050	SECTION 37. The following laws are repealed:
1051	1051	(1) Sections 2210.003(5) and (12), Insurance Code;
1052	1052	(2) Section 2210.059, Insurance Code;
1053	1053	(3) Section 2210.351(b), Insurance Code;
1054	1054	(4) Sections 2210.352, 2210.353, and 2210.354,
1055	1055	Insurance Code;
1056	1056	(5) Sections 2210.355(c), (d), and (e), Insurance
1057	1057	Code;
1058	1058	(6) Sections 2210.356(a), (c), and (d), Insurance
1059	1059	Code;
1060	1060	(7) Section 2210.359, Insurance Code;
1061	1061	(8) Section 2210.360, Insurance Code; and
1062	1062	(9) Section 2210.502(c), Insurance Code.
1063	1063	SECTION 38. (a) The board of directors of the Texas
1064	1064	Windstorm Insurance Association established under Section
1065	1065	2210.102, Insurance Code, as that section existed before amendment
1066	1066	by this Act, is abolished effective December 31, 2009.
1067	1067	(b) The governor shall appoint the members of the board of
1068	1068	directors of the Texas Windstorm Insurance Association under
1069	1069	Section 2210.102, Insurance Code, as amended by this Act, for terms
1070	1070	beginning on January 1, 2010.
1071	1071	(c) The term of a person who is serving as a member of the
1072	1072	board of directors of the Texas Windstorm Insurance Association
1073	1073	immediately before the abolition of that board under Subsection (a)
1074	1074	of this section expires on December 31, 2009. Such a person is
1075	1075	eligible for appointment by the governor to the new board of
1076	1076	directors of the Texas Windstorm Insurance Association under
1077	1077	Section 2210.102, Insurance Code, as amended by this Act.
1078	1078	SECTION 39. The commissioner of insurance shall adopt rules
1079	1079	as required by Section 2210.356(b-1), Insurance Code, as added by
1080	1080	this Act, not later than the 180th day after the effective date of
1081	1081	this Act.
1082	1082	SECTION 40. An assessment may not be made before the end of
1083	1083	the 2009-2010 state fiscal biennium under Chapter 2210, Insurance
1084	1084	Code, as amended by this Act, against any member of the Texas
1085	1085	Windstorm Insurance Association until the comptroller has
1086	1086	certified that any tax credits allowable to that member under
1087	1087	Chapter 2210, Insurance Code, as that chapter existed immediately
1088	1088	before amendment by this Act, may be taken within available revenue
1089	1089	that has been certified by the comptroller.
1090	1090	SECTION 41. (a) Except as provided by Subsection (b) of
1091	1091	this section, this Act takes effect immediately if it receives a
1092	1092	vote of two-thirds of all the members elected to each house, as
1093	1093	provided by Section 39, Article III, Texas Constitution. If this
1094	1094	Act does not receive the vote necessary for immediate effect, this
1095	1095	Act takes effect September 1, 2009.
1096	1096	(b) The change in law made by this Act to Sections 2210.251,
1097	1097	2210.252, 2210.254, and 2210.255, Insurance Code, takes effect
1098	1098	September 1, 2010.