81R3918 PB-D
By: Fraser S.B. No. 14
A BILL TO BE ENTITLED
AN ACT
relating to the operation of the Texas Windstorm Insurance
Association and the Texas FAIR Plan Association.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 2210.001, Insurance Code, is amended to
read as follows:
Sec. 2210.001. PURPOSE. The primary purpose of the Texas
Windstorm Insurance Association is the provision of an [An]
adequate market for windstorm and[,] hail[, and fire] insurance in
the seacoast territory of this state. The legislature finds that
the provision of adequate windstorm and hail insurance is necessary
to the economic welfare of this state, and without that insurance,
the orderly growth and development of this state would be severely
impeded. This chapter provides a method by which adequate
windstorm and[,] hail[, and fire] insurance may be obtained in
certain designated portions of the seacoast territory of this
state. The association is intended to serve as a residual insurer of
last resort for windstorm and hail insurance in the seacoast
territory. The association shall:
(1) function in such a manner as to not be a direct
competitor in the private market; and
(2) provide windstorm and hail insurance coverage to
those who are unable to obtain that coverage in the private market.
SECTION 2. Section 2210.002, Insurance Code, is amended to
read as follows:
Sec. 2210.002. SHORT TITLE; SUNSET PROVISION. (a) This
chapter may be cited as the Texas Windstorm Insurance Association
Act.
(b) The association is subject to review under Chapter 325,
Government Code (Texas Sunset Act), but is not abolished under that
chapter. The association shall be reviewed during the period in
which state agencies abolished in 2015 are reviewed. The
association shall pay the costs incurred by the Sunset Advisory
Commission in performing the review of the association under this
subsection. The Sunset Advisory Commission shall determine the
costs of the review performed under this subsection, and the
association shall pay the amount of those costs promptly on receipt
of a statement from the Sunset Advisory Commission regarding those
costs. This subsection expires September 1, 2015.
SECTION 3. Subchapter A, Chapter 2210, Insurance Code, is
amended by adding Section 2210.0025 to read as follows:
Sec. 2210.0025. BIENNIAL REPORT TO LEGISLATURE. On or
before December 31 of each even-numbered year, the board of
directors shall submit to the commissioner, the appropriate
committees of each house of the legislature, and the Sunset
Advisory Commission a written report relating to the operations of
the association during the preceding biennium. The report must
include:
(1) any proposed changes in the laws relating to
regulation of the association and a statement of the reasons for the
changes; and
(2) any information regarding association operations
or procedures that is requested by the department to be addressed in
the report.
SECTION 4. Section 2210.003, Insurance Code, is amended by
adding Subdivision (3-a) and amending Subdivision (6) to read as
follows:
(3-a) "Catastrophe reserve trust fund" means the trust
fund established under Subchapter J.
(6) "Insurance" means Texas [fire and explosion
insurance and Texas] windstorm and hail insurance.
SECTION 5. Sections 2210.004(a) and (g), Insurance Code,
are amended to read as follows:
(a) Except as provided by Subsection (h), for purposes of
this chapter and subject to this section, "insurable property"
means immovable property at a fixed location in a catastrophe area
or corporeal movable property located in that immovable property,
as designated in the plan of operation, that is determined by the
association according to the criteria specified in the plan of
operation to be in an insurable condition against windstorm and
hail [or fire and explosion, as appropriate], as determined by
normal underwriting standards. The term includes property
described by Section 2210.209.
(g) For purposes of this chapter, a residential structure is
insurable property if:
(1) the residential structure is not:
(A) a condominium, apartment, duplex, or other
multifamily residence; or
(B) a hotel or resort facility; and
(2) the residential structure is located within an
area designated as a unit under the Coastal Barrier Resources Act
(Pub. L. No. 97-348)[; and
[(3) a building permit or plat for the residential
structure was filed with the municipality, the county, or the
United States Army Corps of Engineers before June 11, 2003].
SECTION 6. 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, the commissioner may
designate an area of the seacoast territory of this state as a
catastrophe area if the commissioner determines, unless such a
determination results in an adverse impact to the exposure of the
association, 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, 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, that the applicable
insurance coverage is no longer reasonably unavailable to a
substantial number of owners of insurable property within the
designated territory.
(c) [(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, but not
later than the 30th day after the date of the hearing, the
commissioner shall:
(1) approve the request and revoke the designation; or
(2) reject the request.
SECTION 7. Section 2210.008, Insurance Code, is amended to
read as follows:
Sec. 2210.008. DEPARTMENT ORDERS; GENERAL RULEMAKING
AUTHORITY. (a) The [After notice and 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) The commissioner may adopt rules in the manner
prescribed by Subchapter A, Chapter 36, as reasonable and necessary
to implement this chapter. [Before the commissioner adopts an
order, 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. Any person may appear at
the hearing and testify for or against the adoption of the order.]
SECTION 8. Subchapter A, Chapter 2210, Insurance Code, is
amended by adding Section 2210.009 to read as follows:
Sec. 2210.009. LIST OF PRIVATE INSURERS; INCENTIVE PLAN.
(a) The department shall maintain a list of all insurers that
engage in the business of property and casualty insurance in the
voluntary market in the seacoast territory.
(b) The department shall develop incentive programs in the
manner described by Section 2210.053(b) to encourage authorized
insurers to write insurance on a voluntary basis and to minimize the
use of the association as a means to obtain insurance.
SECTION 9. Section 2210.052, Insurance Code, is amended by
amending Subsections (a) and (d) and adding Subsection (e) to read
as follows:
(a) Each member of the association shall participate in
insured losses and operating expenses of the association, in excess
of premium and other revenue [the 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 areas [an area] designated
by the commissioner. The member's participation in the insured
losses and operating expenses of the association in excess of
premium and other revenue [writings] of the association shall be
reduced in accordance with the plan of operation.
(e) Notwithstanding Subsections (a)-(d), an insurer that
becomes a member of the association and that has not previously been
a member of the association is not subject to participation in any
insured losses and operating expenses of the association in excess
of premium and other revenue of the association until the second
anniversary of the date on which the insurer first becomes a member
of the association.
SECTION 10. Section 2210.056(b), Insurance Code, is amended
to read as follows:
(b) The association's assets may not be used for or diverted
to any purpose other than to:
(1) satisfy, in whole or in part, the liability of the
association on claims made on policies written by the association;
(2) make investments authorized under applicable law;
(3) pay reasonable and necessary administrative
expenses incurred in connection with the operation of the
association and the processing of claims against the association;
[or]
(4) satisfy, in whole or in part, the obligations of
the association incurred in connection with Subchapters B-1, J, and
M, including reinsurance, public securities, and financial
instruments; or
(5) make remittance under the laws of this state to be
used by this state to:
(A) pay claims made on policies written by the
association;
(B) purchase reinsurance covering losses under
those policies; or
(C) prepare for or mitigate the effects of
catastrophic natural events.
SECTION 11. 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 12. Chapter 2210, Insurance Code, is amended by
adding Subchapter B-1 to read as follows:
SUBCHAPTER B-1. PAYMENT OF LOSSES
Sec. 2210.071. ANNUAL RESERVES SOLVENCY ASSESSMENT;
PREMIUM SURCHARGES. (a) To ensure available reserves and the
capacity to pay excess losses, the association annually shall
assess the members of the association $400 million, with the
proportion of the assessment allocable to each insurer determined
in the manner used to determine each member's participation in the
association under Section 2210.052. The association shall notify
each member of the association not later than January 1 of each year
of the amount of the member's assessment under this subsection. The
members shall remit their assessments to the association not later
than February 1 of each year. The association shall deposit the
remitted assessments into the catastrophe reserve trust fund not
later than February 15 of each year. A member of the association may
not recoup an assessment paid under this section through a premium
surcharge.
(b) In addition to the assessment under Subsection (a), the
association, each member of the association, and each insurer that
engages in the business of property and casualty insurance in this
state, including the Texas FAIR Plan Association, shall collect a
premium surcharge for one year, as provided by this section from
their policyholders who reside or have operations in, or whose
insured property is located in a catastrophe area.
(c) The association shall collect from its policyholders
the nonrefundable premium surcharge in an amount equal to 20
percent of the association's annual policy premium. Each insurer
and the Texas FAIR Plan Association shall collect from their
affected policyholders the nonrefundable premium surcharge in an
amount equal to three percent of policy premium.
(d) Each insurer and the Texas FAIR Plan Association shall
remit the premium surcharge under this section to the association
not later than the 20th day after the last day of each calendar
quarter. The association shall deposit the remitted premium
surcharges in the catastrophe reserve trust fund not later than the
30th day after the last day of each calendar quarter.
(e) A premium surcharge under this section shall apply to
all policies that provide coverage on any premises, locations,
operations, or property located in the area described by Subsection
(b) for all property and casualty lines of insurance, other than
federal flood insurance, workers' compensation insurance, accident
and health insurance, and medical malpractice insurance.
(f) A premium surcharge under this section is a separate
nonrefundable charge in addition to the premiums collected and is
not subject to premium tax or commissions. Failure by a
policyholder to pay the surcharge constitutes failure to pay
premium for purposes of policy cancellation.
(g) The commissioner by rule may prescribe procedures and
time periods for implementing this section, including for
collection of an assessment or a premium surcharge under this
section.
Sec. 2210.072. PAYMENT OF EXCESS LOSSES; AUTHORIZATION TO
REINSURE OR BORROW. (a) If an occurrence or series of occurrences
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 and operating expenses shall
be paid as provided by this subchapter.
(b) The association shall pay losses in excess of premium
and other revenue of the association from available reserves of the
association and available amounts in the catastrophe reserve trust
fund.
(c) The association may borrow from, or enter into other
financing arrangements with, any market sources at prevailing
interest rates as authorized by this subchapter and as necessary to
pay insured losses.
(d) The association may pay losses in excess of premium and
other revenue of the association with:
(1) reinsurance proceeds, as provided by this
subchapter, from reinsurance purchased by the association as
authorized under Section 2210.453;
(2) the proceeds of Class 1 or Class 2 public
securities authorized under Section 2210.074, 2210.075, 2210.077,
or 2210.078; and
(3) proceeds from financial instruments, including
loans or other financing arrangements described by Subsection (c),
as authorized under this subchapter.
(e) With respect to assessments to members of the
association, the proportion of the losses allocable to each insurer
under this subchapter shall be determined in the manner used to
determine each insurer's participation in the association for the
year under Section 2210.052.
Sec. 2210.073. PAYMENT FROM TRUST FUND; ASSESSMENT;
REINSURANCE. (a) For each occurrence, losses shall be paid from
the catastrophe reserve trust fund and any available reinsurance.
(b) For each occurrence, if the association's losses and
operating expenses result in withdrawals from the catastrophe
reserve trust fund, the amounts withdrawn shall be replenished to
an amount equal to the lesser of the balance of the trust fund
immediately before the withdrawals, reduced by any anticipated
payments from prior occurrences, or $400 million. Not later than
the 30th day after an occurrence, the board of directors shall
determine if it is necessary to withdraw funds from the catastrophe
reserve trust fund and shall assess the members of the association
as necessary to replenish the trust fund as required under this
subsection. The proportion of the assessment allocable to each
insurer shall be determined in the manner used to determine each
member's participation in the association under Section 2210.052.
(c) Assessments against members of the association under
this section may not exceed $400 million during a calendar year.
(d) The amount of an assessment under this section must be:
(1) provided to each member of the association not
later than the fifth day after the date the assessment is determined
by the board of directors under Subsection (b); and
(2) paid by each member not later than the 30th day
after the date on which the insurer receives notice of the amount of
its assessment.
(e) A member may not recoup an assessment paid under this
section through a premium surcharge.
(f) The association may purchase reinsurance in addition to
using some or all of the trust fund if, after a cost-benefit
analysis or other appropriate examination, the board of directors
determines that the use of reinsurance is a fiscally appropriate
alternative to other sources of funding or is economically
beneficial to this state. If the association purchases reinsurance
under this section, the cost of the reinsurance shall be paid from
premium paid by policyholders, other revenue of the association,
and the catastrophe reserve trust fund.
Sec. 2210.074. PAYMENT FROM CLASS 1 PUBLIC SECURITIES;
REINSURANCE; FINANCIAL INSTRUMENTS. (a) Losses not paid under
Section 2210.073 shall be paid as provided by this section.
(b) The losses may be paid with:
(1) proceeds from Class 1 public securities authorized
to be issued in accordance with Subchapter M before the date of any
occurrence that results in insured losses under Subsection (a);
(2) available reinsurance described by Subsection
(f);
(3) proceeds from financial instruments described by
Subsection (e); or
(4) a combination of reinsurance, public securities,
and financial instruments described by Subdivisions (1)-(3).
(c) Public securities described by Subsection (b)(1) may be
issued if the board of directors determines, before the date of any
occurrence, that the amount available from premium and other
revenue, in combination with the amounts available from the
catastrophe reserve trust fund, any reinsurance, and any financial
instruments may be insufficient to pay insured losses. The public
securities shall be issued as necessary in a principal amount not to
exceed $500 million per occurrence.
(d) Any public securities proceeds received under this
section:
(1) must be used before the proceeds of any public
securities that the association authorizes to be issued under
Section 2210.075 on or after any catastrophic event; and
(2) may not be used to fund losses of any catastrophic
event occurring before the date on which public securities
described by this section are authorized to be issued.
(e) Under the authority of Section 2210.072(c), the
association may borrow from, or enter into other financing
arrangements with, any market source, under which the market source
makes interest-bearing loans to the association to enable the
association to pay losses under this section in lieu of, or in
addition to, the issuance of public securities.
(f) The association may purchase reinsurance in lieu of, or
in addition to, using Class 1 public securities or proceeds of
financial instruments authorized under this section if, after a
cost-benefit analysis or other appropriate examination, the board
of directors determines that the use of reinsurance is a fiscally
appropriate alternative to other sources of funding or is
economically beneficial to this state. If the association
purchases reinsurance under this section, the cost of the
reinsurance shall be paid from premium paid by policyholders of the
association, other revenue of the association, and the catastrophe
reserve trust fund.
(g) If the losses are paid with public securities or
proceeds from financial instruments described by this section, the
public securities or proceeds from financial instruments shall be
repaid by premium surcharges in the manner prescribed by Section
2210.612.
Sec. 2210.075. PAYMENT FROM CLASS 2 PUBLIC SECURITIES;
REINSURANCE; FINANCIAL INSTRUMENTS. (a) Losses not paid under
Sections 2210.073 and 2210.074 shall be paid as provided by this
section.
(b) The losses may be paid from:
(1) proceeds from Class 2 public securities authorized
to be issued in accordance with Subchapter M on or after the date of
any occurrence that results in insured losses under Subsection (a);
(2) available reinsurance described by Subsection
(e);
(3) proceeds from financial instruments described by
Subsection (d); or
(4) a combination of the reinsurance, public
securities, and financial instruments described by Subdivisions
(1)-(3).
(c) Public securities described by Subsection (b)(1) may be
issued as necessary in a principal amount not to exceed $1 billion
per occurrence.
(d) Under the authority of Section 2210.072(c), the
association may borrow from, or enter into other financial
arrangements with, any market source, under which the market source
makes interest-bearing loans to the association to enable the
association to pay losses under this section without the issuance
of public securities.
(e) The association may purchase reinsurance in lieu of, or
in addition to, using Class 2 public securities or proceeds of
financial instruments authorized under this section if, after a
cost-benefit analysis or other appropriate examination, the board
of directors determines that the use of reinsurance is a fiscally
appropriate alternative to other sources of funding or is
economically beneficial to this state. If the association
purchases reinsurance under this section, the cost of the
reinsurance shall be paid from premium paid by the policyholders of
the association, other revenue of the association, and the
catastrophe reserve trust fund.
(f) If the losses are paid with public securities or
proceeds from financial instruments described by this section, the
public securities or proceeds from financial instruments shall be
repaid by premium surcharges in the manner prescribed by Section
2210.613.
Sec. 2210.076. PAYMENT FROM ASSOCIATION ASSESSMENT.
(a) Losses not paid under Sections 2210.073-2210.075 shall be paid
as provided by this section.
(b) The association shall assess the members of the
association $300 million per occurrence for the payment of losses
described by this section. The association shall notify each
member of the association of the amount of the member's assessment
under this subsection. The proportion of the losses allocable to
each insurer under this section shall be determined in the manner
used to determine each insurer's participation in the association
for the year under Section 2210.052.
(c) The association may not assess members of the
association under this section more than twice in any calendar
year.
(d) A member of the association may recoup an assessment
paid under this section through a premium surcharge collected for
one year on each policy of property or casualty insurance written by
the member. A premium surcharge under this section shall apply to
all policies that provide coverage on any premises, locations,
operations, or property located in this state for all property and
casualty lines of insurance, other than federal flood insurance,
workers' compensation insurance, accident and health insurance,
and medical malpractice insurance.
(e) A premium surcharge under this section is a separate
nonrefundable charge in addition to the premiums collected and is
not subject to premium tax or commissions. Failure to pay the
premium surcharge by a policyholder constitutes failure to pay
premium for purposes of policy cancellation.
Sec. 2210.077. PAYMENT FROM CLASS 2 PUBLIC SECURITIES;
REINSURANCE; FINANCIAL INSTRUMENTS. (a) Losses not paid under
Sections 2210.073-2210.076 shall be paid as provided by this
section.
(b) The losses may be paid from:
(1) proceeds from Class 2 public securities authorized
to be issued in accordance with Subchapter M on or after the date of
any occurrence that results in insured losses under Subsection (a);
(2) available reinsurance described by Subsection
(e);
(3) proceeds from financial instruments described by
Subsection (d); or
(4) a combination of the reinsurance, public
securities, and financial instruments described by Subdivisions
(1)-(3).
(c) Public securities described by Subsection (b)(1) may be
issued as necessary in a principal amount not to exceed $500 million
per occurrence.
(d) Under the authority of Section 2210.072(c), the
association may borrow from, or enter into other financing
agreements with, any market source, under which the market source
makes interest-bearing loans to the association to enable the
association to pay losses under this section in lieu of, or in
addition to, the issuance of public securities.
(e) The association may purchase reinsurance in lieu of, or
in addition to, using Class 2 public securities or proceeds from
financial instruments authorized under this section if, after a
cost-benefit analysis or other appropriate examination, the board
of directors determines that the use of reinsurance is a fiscally
appropriate alternative to other sources of funding or is
economically beneficial to this state. If the association
purchases reinsurance under this section, the cost of the
reinsurance shall be paid from premium paid by the policyholders of
the association, other revenue of the association, and the
catastrophe reserve trust fund.
(f) If the losses are paid with public securities or
proceeds from financial instruments described by this section, the
public securities or proceeds from financial instruments shall be
repaid by premium surcharges in the manner prescribed by Section
2210.613.
Sec. 2210.078. PAYMENT FROM CLASS 2 PUBLIC SECURITIES;
REINSURANCE. (a) Losses not paid under Sections 2210.073-2210.077
shall be paid as provided by this section.
(b) The losses may be paid from:
(1) proceeds from Class 2 public securities authorized
to be issued in accordance with Subchapter M on or after the date of
any occurrence that results in insured losses under Subsection (a);
(2) available reinsurance described by Subsection
(d); or
(3) a combination of the reinsurance and public
securities described by Subdivisions (1) and (2).
(c) Public securities described by Subsection (b)(1) may be
issued as necessary in a principal amount not to exceed $2.8 billion
per occurrence.
(d) The association may purchase reinsurance in lieu of, or
in addition to, using Class 2 public securities authorized under
this section if, after a cost-benefit analysis or other appropriate
examination, the board of directors determines that the use of
reinsurance is a fiscally appropriate alternative to other sources
of funding or is economically beneficial to this state. If the
association purchases reinsurance under this section, the cost of
the reinsurance shall be paid from premium paid by the
policyholders of the association, other revenue of the association,
and the catastrophe reserve trust fund.
(e) If the losses are paid with public securities described
by this section, the public securities shall be repaid by premium
surcharges in the manner prescribed by Section 2210.613.
Sec. 2210.079. PAYMENT FROM ADDITIONAL ASSOCIATION
ASSESSMENTS. (a) Losses not paid under Sections 2210.073-2210.078
and any available reinsurance shall be paid as provided by this
section.
(b) The board of directors shall assess the members of the
association for the payment of losses described by this section.
The association shall notify each member of the association of the
amount of the member's assessments under this subsection, with the
proportion of the assessment allocable to each insurer determined
in the manner used to determine each member's participation in the
association under Section 2210.052.
(c) A member of the association may not recoup an assessment
paid under this section through a premium surcharge or tax credit.
SECTION 13. The heading to Subchapter C, Chapter 2210,
Insurance Code, is amended to read as follows:
SUBCHAPTER C. ASSOCIATION BOARD OF DIRECTORS; GENERAL
POWERS AND DUTIES OF BOARD OF DIRECTORS
SECTION 14. Section 2210.102, Insurance Code, is amended to
read as follows:
Sec. 2210.102. COMPOSITION. (a) The board of directors is
composed of [the following] nine members appointed by the
commissioner in accordance with this section.
(b) Four members must be[:
[(1) five] representatives of different insurers who
are members of the association.
(c) Three members must be [, elected by the members as
provided by the plan of operation;
[(2) two] public representatives, at least one of whom
[who are nominated by the office of public insurance counsel and
who], as of the date of the appointment, does not[:
[(A)] reside in or own property in a first tier
coastal county.
(d) Two members must be [a catastrophe area; and
[(B) are policyholders of the association; and
[(3) two] property and casualty agents who are
licensed under this code and are not captive agents. One of the
agents, but not more than one, as of the date of the appointment,
must maintain the agent's principal office in a first tier coastal
county.
(e) All members must [, each of whom must:
[(A)] have demonstrated experience in insurance,
general business, or actuarial principles sufficient to make the
success of the association probable[;
[(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].
(f) The commissioner shall appoint one person to serve as a
nonvoting member of the board to advise the board regarding issues
relating to the inspection process. The commissioner may give
preference in an appointment under this subsection to a person who
is a qualified inspector under Section 2210.254. The nonvoting
member appointed under this section must:
(1) be an engineer licensed by, and in good standing
with, the Texas Board of Professional Engineers;
(2) reside in a first tier coastal county; and
(3) be knowledgeable of, and have professional
expertise in, wind-related design and construction practices in
coastal areas that are subject to high winds and hurricanes.
(g) [(b)] The persons appointed under Subsection (c)
[Subsections (a)(2) and (3)] must be from different counties.
SECTION 15. Section 2210.103, Insurance Code, is amended by
adding Subsection (c) to read as follows:
(c) A member of the board of directors may be removed by the
commissioner without cause. The commissioner shall appoint a
replacement in the manner provided by Section 2210.102 for a member
who leaves or is removed from the board of directors.
SECTION 16. Section 2210.104, Insurance Code, is amended to
read as follows:
Sec. 2210.104. OFFICERS. The board of directors shall
elect from the board's membership an executive committee consisting
of a presiding officer, assistant presiding officer, and
secretary-treasurer. [At least one of the officers must be a member
appointed under Section 2210.102(a)(2) or (3).]
SECTION 17. 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 18. Subchapter C, Chapter 2210, Insurance Code, is
amended by adding Section 2210.107 to read as follows:
Sec. 2210.107. PRIMARY BOARD OBJECTIVES. The primary
objectives of the board of directors are to ensure that the
association:
(1) operates in accordance with this chapter and
commissioner rules;
(2) complies with sound insurance principles; and
(3) meets all standards imposed under this chapter.
SECTION 19. Section 2210.151, Insurance Code, is amended to
read as follows:
Sec. 2210.151. ADOPTION OF PLAN OF OPERATION. With the
advice of the board of directors, the commissioner by rule shall
adopt the plan of operation to provide[:
[(1)] Texas windstorm and hail insurance in a
catastrophe area[; and
[(2) Texas fire and explosion insurance in an
inadequate fire insurance area].
SECTION 20. Section 2210.152(a), Insurance Code, is amended
to read as follows:
(a) The plan of operation must:
(1) provide for the efficient, economical, fair, and
nondiscriminatory administration of the association; and
(2) include:
(A) a plan for the equitable assessment of the
members of the association to defray losses and expenses;
(B) underwriting standards;
(C) procedures for accepting and ceding
reinsurance;
(D) procedures for obtaining and repaying
amounts received under financial instruments authorized under
Subchapter B-1;
(E) procedures for determining the amount of
insurance to be provided to specific risks;
(F) [(E)] time limits and procedures for
processing applications for insurance; and
(G) [(F)] other provisions as considered
necessary by the department to implement the purposes of this
chapter.
SECTION 21. Section 2210.202, Insurance Code, is amended to
read as follows:
Sec. 2210.202. APPLICATION FOR COVERAGE. (a) A person who
has an insurable interest in insurable property may apply to the
association for insurance coverage provided under the plan of
operation and an inspection of the property, subject to any rules[,
including any inspection fee,] established by the board of
directors and approved by the commissioner. The association shall
make insurance available to each applicant in the catastrophe area
whose property is insurable property but who, after diligent
efforts, is unable to obtain property insurance through the
voluntary market, as evidenced by two declinations from insurers
authorized to engage in the business of, and writing, property
insurance in the first tier coastal counties. For purposes of this
section, "declination" has the meaning assigned by the plan of
operation and shall include a refusal to offer coverage and the
inability to obtain substantially equivalent insurance coverage.
Notwithstanding Section 2210.203(c), evidence of two declinations
is also required with an application for renewal of an association
policy.
(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. The application must also contain a
statement that the agent possesses proof of the declinations
described by Subsection (a).
SECTION 22. Section 2210.203, Insurance Code, is amended by
adding Subsection (a-1) to read as follows:
(a-1) Notwithstanding Subsection (a), if all or any part of
the property for which an application for new or renewal insurance
coverage is made is located in Zone V or another similar zone with
an additional hazard associated with storm waves, as defined by the
National Flood Insurance Program, and if flood insurance under that
federal program is available, the association may not issue a new or
renewal insurance policy unless evidence that the property is
covered by a flood insurance policy is submitted to the
association. If evidence establishes that flood insurance is
unavailable for all or any part of the property for which the
application for new or renewal coverage is made, an association
policy insuring a residential structure described by Section
2210.004(g) is subject to a premium surcharge for the insurance
coverage obtained through the association in an amount equal to 30
percent of the premium. A premium surcharge collected under this
subsection shall be deposited in the catastrophe reserve trust
fund. A premium surcharge under this subsection is a separate
nonrefundable charge in addition to the premiums collected and is
not subject to premium tax or commissions. Failure to pay the
surcharge by a policyholder constitutes failure to pay premium for
purposes of policy cancellation.
SECTION 23. Section 2210.251, Insurance Code, is amended to
read as follows:
Sec. 2210.251. INSPECTION REQUIREMENTS. (a) Except as
provided by this section, to be considered insurable property
eligible for windstorm and hail insurance coverage from the
association, a structure that is constructed or repaired or to
which additions are made on or after January 1, 1988, must be
inspected [or approved] by the association [department] for
compliance with the plan of operation.
(b) After January 1, 2004, for geographic areas specified by
the commissioner, the commissioner by rule shall adopt the 2003
International Residential Code for one- and two-family dwellings
published by the International Code Council. For those geographic
areas, the commissioner by rule may adopt a subsequent edition of
that code and may adopt any supplements published by the
International Code Council and amendments to that code.
(c) After January 1, 2004, a person must submit a notice of a
windstorm inspection to the association [unit responsible for
certification of windstorm inspections at the department] before
beginning to construct, alter, remodel, enlarge, or repair a
structure.
(d) A structure constructed or repaired or to which
additions were made before January 1, 1988, that is located in an
area that was governed at the time of the construction, repair, or
addition by a building code recognized by the association is
insurable property eligible for windstorm and hail insurance
coverage from the association without compliance with the
inspection [or approval] requirements of this section or the plan
of operation.
(e) A structure constructed or repaired or to which
additions were made before January 1, 1988, that is located in an
area not governed by a building code recognized by the association
is insurable property eligible for windstorm and hail insurance
coverage from the association without compliance with the
inspection [or approval] requirements of this section or the plan
of operation if the structure was previously insured by an insurer
authorized to engage in the business of insurance in this state and
the structure is in essentially the same condition as when
previously insured, except for normal wear and tear, and is without
any structural change other than a change made according to code.
For purposes of this subsection, evidence of previous insurance
coverage includes:
(1) a copy of a previous insurance policy;
(2) copies of canceled checks or agent's records that
show payments for previous policies; and
(3) a copy of the title to the structure or mortgage
company records that show previous policies.
(f) The association [department] shall issue a certificate
of compliance for each structure that qualifies for coverage. The
certificate is evidence of insurability of the structure by the
association.
(g) [The department may enter into agreements and contracts
as necessary to implement this section.
[(h)] The association [department] may charge a reasonable
fee to cover the cost of making building requirements and
inspection standards available to the public.
(h) The association may charge a reasonable fee for each
inspection in an amount set by commissioner rule. The association
may use fees collected under this section for operating expenses or
for the purchase of reinsurance.
(i) Without limitation of the department's authority to
otherwise enforce this chapter, the department shall monitor the
association's compliance with this subchapter and may take any
disciplinary action available under this code to enforce this
subchapter, including an action authorized under Chapters 82, 83,
and 84.
(j) The commissioner may adopt rules in the manner
prescribed by Subchapter A, Chapter 36, as necessary to implement
this section.
SECTION 24. Sections 2210.254(a), (c), and (d), Insurance
Code, are amended to read as follows:
(a) For purposes of this chapter, a "qualified inspector"
includes:
(1) a person determined by the association
[department] to be qualified because of training or experience to
perform building inspections;
(2) a licensed professional engineer who meets the
requirements specified by the association [commissioner rule] for
appointment to conduct windstorm inspections; and
(3) an inspector who:
(A) is certified by the International Code
Council, the Building Officials and Code Administrators
International, Inc., the International Conference of Building
Officials, or the Southern Building Code Congress International,
Inc.;
(B) has certifications as a buildings inspector
and coastal construction inspector; and
(C) complies with other requirements specified
by the association [commissioner rule].
(c) Before performing building inspections, a qualified
inspector must be approved and appointed or employed by the
association [department].
(d) The association [department] may charge a reasonable
fee for the filing of applications by and determining the
qualifications of persons for appointment as qualified inspectors.
SECTION 25. Section 2210.255, Insurance Code, is amended to
read as follows:
Sec. 2210.255. APPOINTMENT OF LICENSED ENGINEER AS
INSPECTOR. (a) On request of an engineer licensed by the Texas
Board of Professional Engineers, the association may [commissioner
shall] appoint the engineer as an inspector under this subchapter
on receipt of information satisfactory to the association [not
later than the 10th day after the date the engineer delivers to the
commissioner information demonstrating] that the engineer is
qualified to perform windstorm inspections under this subchapter.
(b) The association shall consult with the commissioner
regarding [shall adopt rules establishing] the information to be
considered in appointing engineers under this section.
SECTION 26. Subchapter F, Chapter 2210, Insurance Code, is
amended by adding Section 2210.2565 to read as follows:
Sec. 2210.2565. PROCEDURES REGARDING APPOINTMENT OF
INSPECTORS. The association shall develop procedures for the
appointment and oversight of qualified inspectors appointed under
Sections 2210.254 and 2210.255, including procedures relating to
the suspension or revocation of an appointment made by the
association.
SECTION 27. Subchapter F, Chapter 2210, Insurance Code, is
amended by adding Sections 2210.258, 2210.259, 2210.260, and
2210.261 to read as follows:
Sec. 2210.258. MANDATORY COMPLIANCE WITH BUILDING CODES;
ELIGIBILITY. (a) Notwithstanding any other provision of this
chapter, to be eligible for insurance through the association, all
construction, alteration, remodeling, enlargement, and repair of
any structure located in the catastrophe area that is begun on or
after January 1, 2010, must be performed in compliance with the
applicable building code standards, as set forth in the plan of
operation.
(b) The association may not insure a structure described by
Subsection (a) until:
(1) the structure has been inspected for compliance
with the plan of operation in accordance with Section 2210.251(a);
and
(2) a certificate of compliance has been issued for
the structure in accordance with Section 2210.251(f).
Sec. 2210.259. EXCEPTION; SURCHARGE FOR CERTAIN
NONCOMPLIANT STRUCTURES. (a) The association may not insure a
structure that has not been inspected for compliance with the plan
of operation in accordance with Section 2210.251(a) and for which a
certificate of compliance has not been issued on the structure in
accordance with Section 2210.251(f), unless the structure:
(1) is a residential structure or is the property of a
school district or of a public or not-for-profit postsecondary
educational institution, including a junior college;
(2) was constructed, altered, remodeled, enlarged, or
repaired before January 1, 2010, and has not been further altered,
remodeled, enlarged, or repaired on or after January 1, 2010; and
(3) was a structure:
(A) insured in the private market within the
12-month period immediately preceding the date of the application;
or
(B) covered by a self-insured school district or
postsecondary educational institution.
(b) A structure eligible for insurance under Subsection (a)
is subject to a premium surcharge equal to 30 percent of the premium
for insurance coverage obtained through the association.
(c) A premium surcharge collected under this section shall
be deposited in the catastrophe reserve trust fund. A premium
surcharge under this section is a separate nonrefundable charge in
addition to the premiums collected and is not subject to premium tax
or commissions. Failure to pay the surcharge by a policyholder
constitutes failure to pay premium for purposes of policy
cancellation.
Sec. 2210.260. STRUCTURES NOT SUBJECT TO PREMIUM SURCHARGE.
Notwithstanding Section 2210.259, the association may insure
without a premium surcharge a structure that:
(1) was constructed or repaired or to which additions
were made before January 1, 1988, and not thereafter, and is
eligible for association coverage under Section 2210.251(d) or (e);
or
(2) is the subject of a certificate of compliance
issued by the department and that has not been altered, remodeled,
enlarged, or repaired after the date of issuance of the last
department certificate.
Sec. 2210.261. RULES. The commissioner may adopt rules to
implement Sections 2210.258, 2210.259, and 2210.260.
SECTION 28. Sections 2210.351(c) and (d), Insurance Code,
are amended to read as follows:
(c) Except as provided by Subsection (d), as [As] soon as
reasonably possible after the filing has been made, the
commissioner in writing shall approve[, modify,] or disapprove the
filing. A filing is considered approved unless [modified or]
disapproved on or before the 30th day after the date of the filing.
If the commissioner disapproves a filing, the commissioner shall
state in writing the reasons for the disapproval and the criteria
the association is required to meet to obtain approval.
(d) The association may use a rate filed by the association
without prior commissioner approval if:
(1) the filing is made not later than the 30th day
before the date of any use or delivery for use of the rate;
(2) the filed rate does not exceed 105 percent of the
rate used by the association during the preceding 12-month period;
(3) the filed rate does not reflect a rate change for
an individual rating class that is 10 percent higher than any rate
used by the association for that rating class during the preceding
12-month period; and
(4) the commissioner has not disapproved the filing in
writing, advising of the reasons for the disapproval and the
criteria the association is required to meet to obtain approval.
[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 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 29. Section 2210.352, Insurance Code, is amended by
amending Subsections (a), (b), (c), (e), and (f) and adding
Subsection (a-1) 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.
(a-1) The association may use a rate filed by the
association under this section without prior commissioner approval
if:
(1) the filing is made not later than the 30th day
before the date of any use or delivery for use of the rate;
(2) the filed rate does not exceed 105 percent of the
rate used by the association during the preceding 12-month period;
(3) the filed rate does not reflect a rate change for
an individual rating class that is 10 percent higher than any rate
used by the association for that rating class during the preceding
12-month period; and
(4) the commissioner has not provided written notice
to the association that the filing will be disapproved under the
procedure established under Subsection (g).
(b) Except as provided by Subsection (a-1), before [Before]
approving or [,] disapproving[, or modifying] a filing under this
section, the commissioner shall provide all interested persons a
reasonable opportunity to:
(1) review the filing;
(2) obtain copies of the filing on payment of any
legally required copying cost; and
(3) submit to the commissioner written comments or
information related to the filing.
(c) Except as provided by Subsection (a-1), the [The]
commissioner shall schedule an open meeting not later than the 45th
day after the date the department receives a filing under this
section at which interested persons may present written or oral
comments relating to the filing.
(e) Except as provided by Subsection (a-1), the [The]
department shall file with the secretary of state for publication
in the Texas Register notice that a filing has been made under
Subsection (a) not later than the seventh day after the date the
department receives the filing. The notice must include
information relating to:
(1) the availability of the filing for public
inspection at the department during regular business hours and the
procedures for obtaining copies of the filing;
(2) procedures for making written comments related to
the filing; and
(3) the time, place, and date of the open meeting
scheduled under Subsection (c) at which interested persons may
present written or oral comments relating to the filing.
(f) After the conclusion of the open meeting, the
commissioner shall approve or [,] disapprove[, or modify] the
filing in writing not later than November 15 of the year in which
the filing was made. If the filing is not approved or [,]
disapproved[, or modified] on or before that date, the filing is
considered approved.
SECTION 30. Section 2210.353, Insurance Code, is amended to
read as follows:
Sec. 2210.353. MANUAL RATE FILINGS: AMENDED ANNUAL
FILING. (a) Not later than the 30th day after the date the
association receives the commissioner's written disapproval under
Section 2210.352(f), the association may file with the commissioner
an amended annual filing that conforms to all criteria stated in
that written disapproval.
(b) Not later than the 30th day after the date an amended
filing made under Subsection (a) is received, the commissioner
shall approve [the amended filing with or without modifications] or
disapprove the amended filing. If the filing is not [modified or]
disapproved on or before the 30th day after the date of receipt, the
filing is considered approved [without modification]. If the
commissioner disapproves a filing, the commissioner shall state in
writing the reasons for the disapproval and the criteria the
association is required to meet to obtain approval.
(c) Before approving or disapproving an amended annual
filing under this section, the commissioner shall, in the manner
provided by Section 2210.352(b), provide all interested persons a
reasonable opportunity to:
(1) review the amended annual filing;
(2) obtain copies of the amended annual filing on
payment of any legally required copying cost; and
(3) submit to the commissioner written comments or
information related to the amended annual filing.
[(d) The commissioner may, in the manner provided by
Sections 2210.352(c) and (d), hold a hearing regarding an amended
filing not later than the 20th day after the date the department
receives the amended filing.
[(e) Not later than the 10th day after the date the hearing
is concluded, the commissioner shall approve or disapprove the
amended filing.
[(f) The requirements imposed under Subsection (a) and
under Sections 2210.352(e), (f), and (g) apply to a hearing
conducted under this section and the commissioner's decision
resulting from that hearing.]
SECTION 31. Section 2210.354(a), Insurance Code, is amended
to read as follows:
(a) In conjunction with the review of a filing under Section
2210.352 or 2210.353:
(1) the commissioner may request the association to
provide additional supporting information relating to the filing;
and
(2) in the case of a filing in which the filed rate
exceeds 105 percent of the rate used by the association during the
preceding 12-month period, any interested person may file a written
request with the commissioner for additional supporting
information relating to the filing.
SECTION 32. Section 2210.355, Insurance Code, is amended by
amending Subsection (b) and adding Subsection (h) 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.
(h) The association may establish rating territories and
may vary rates among the territories.
SECTION 33. 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 makes [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
Subchapter B-1 [Section 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 use [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 make payments to the trust fund, to procure
[or a] reinsurance, or to make payments to the trust fund and to
procure reinsurance [program approved by the commissioner].
(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 Subchapter B-1 [Section 2210.058(a)].
SECTION 34. 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 [program
approved by the department].
(b) The [With the approval of the department, the]
association may purchase [establish a] reinsurance [program] that
operates in addition to or in concert with the trust fund, public
securities, financial instruments, and assessments authorized by
this chapter.
SECTION 35. Section 2210.454(b), Insurance Code, is amended
to read as follows:
(b) Each state fiscal year, the department may fund the
mitigation and preparedness plan using available funds [the
investment income of the trust fund in an amount not less than $1
million and not more than 10 percent of the investment income of the
prior fiscal year. From that amount and as part of that plan, the
department may use in each fiscal year $1 million for the windstorm
inspection program established under Section 2210.251].
SECTION 36. 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
authorizing the issuance of public securities to provide a method
to raise funds to provide windstorm and hail insurance through the
association in certain designated portions of the state is for the
benefit of the public and in furtherance of a public purpose.
Sec. 2210.602. DEFINITIONS. In this subchapter:
(1) "Board" means the board of directors of the Texas
Public Finance Authority.
(2) "Class 1 public securities" means public
securities authorized to be issued before the occurrence of a
catastrophic event by Section 2210.074.
(3) "Class 2 public securities" means public
securities authorized to be issued on or after the occurrence of a
catastrophic event by Section 2210.075, 2210.077, or 2210.078.
(4) "Credit agreement" has the meaning assigned by
Chapter 1371, Government Code.
(5) "Insurer" means each property and casualty insurer
authorized to engage in the business of property and casualty
insurance in this state and an affiliate of such an insurer, as
described by Section 823.003, including an affiliate that is not
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.
(6) "Public security" means a debt instrument or other
public security issued by the Texas Public Finance Authority.
(7) "Public security administrative expenses" means
expenses incurred to administer public securities issued under this
subchapter, including fees for paying agents, trustees, and
attorneys, and for other professional services necessary to ensure
compliance with applicable state or federal law.
(8) "Public security obligations" means the principal
of a public security and any premium and interest on a public
security issued under this subchapter, together with any amount
owed under a related credit agreement.
(9) "Public security obligation revenue fund" means
the dedicated trust fund established by the association outside the
state treasury under this subchapter.
(10) "Public security resolution" means the
resolution or order authorizing public securities to be issued
under this subchapter.
Sec. 2210.603. APPLICABILITY OF OTHER LAWS. The board
shall issue the public securities as described by Section 2210.604
in accordance with and subject to the requirements of Chapter 1232,
Government Code, and other provisions of Title 9, Government Code,
that apply to issuance of a public security by a state agency. In
the event of a conflict, this subchapter controls.
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 Class
1 or Class 2 public securities.
(b) The association shall specify in the association's
request to the board the maximum principal amount of the public
securities and the maximum term of the public securities.
(c) The principal amount determined by the association
under Subsection (b) may be increased to include an amount
sufficient to:
(1) pay the costs related to issuance of the public
securities;
(2) provide a public security reserve fund; and
(3) capitalize interest for the period determined
necessary by the association, not to exceed two years.
Sec. 2210.605. TERMS OF ISSUANCE. (a) The board shall
determine the method of sale, type and form of public security,
maximum interest rates, and other terms of the public securities
that, in the board's judgment, best achieve the goals of the
association and effect the borrowing at the lowest practicable
cost. The board may enter into a credit agreement in connection
with the public securities.
(b) Public securities must be issued in the name of the
association.
Sec. 2210.606. ADDITIONAL COVENANTS. The board may make
additional covenants with respect to the public securities and the
designated income and receipts of the association pledged to their
payment, and provide for the flow of funds and the establishment,
maintenance, and investment of funds and accounts with respect to
the public securities, and the administration of those funds and
accounts, as provided in the proceedings authorizing the public
securities.
Sec. 2210.607. PUBLIC SECURITY PROCEEDS. The proceeds of
public securities issued by the board under this subchapter may be
deposited with a trustee selected by the association in
consultation with the commissioner or held by the comptroller in a
dedicated trust fund outside the state treasury in the custody of
the comptroller.
Sec. 2210.608. USE OF PUBLIC SECURITY PROCEEDS. (a) Public
security proceeds, including investment income, shall be held in
trust for the exclusive use and benefit of the association. The
association may use the proceeds to:
(1) pay incurred claims and operating expenses of the
association;
(2) purchase reinsurance for the association;
(3) pay the costs of issuing the public securities,
and public security administrative expenses, if any;
(4) provide a public security reserve; and
(5) pay capitalized interest and principal on the
public securities for the period determined necessary by the
association.
(b) Any excess public security proceeds remaining after the
purposes for which the public securities were issued are satisfied
may be used to purchase or redeem outstanding public securities. If
there are no outstanding public security obligations or public
security administrative expenses, the excess proceeds shall be
transferred to the catastrophe reserve trust fund.
Sec. 2210.609. REPAYMENT OF ASSOCIATION'S PUBLIC SECURITY
OBLIGATIONS. (a) The association shall pay all public security
obligations from available funds collected by the association and
deposited into the public security obligation revenue fund. If the
association determines that it is unable to pay the public security
obligations and public security administrative expenses, if any,
with available funds, the association shall pay those obligations
and expenses in accordance with Sections 2210.612 and 2210.613, as
applicable.
(b) The board shall notify the association of the amount of
the public security obligations and the estimated amount of public
security administrative expenses, if any, each year in a period
sufficient, as determined by the association, to permit the
association to determine the availability of funds and assess a
premium surcharge if necessary.
(c) The association shall deposit all revenue collected
under Sections 2210.612 and 2210.613 in the public security
obligation revenue fund. Money deposited in the fund may be
invested as permitted by general law. Money in the fund required to
be used to pay public security obligations and public security
administrative expenses, if any, shall be transferred to the
appropriate funds in the manner and at the time specified in the
proceedings authorizing the public securities to ensure timely
payment of obligations and expenses.
(d) The association shall provide for the payment of the
public security obligations and the public security administrative
expenses by irrevocably pledging revenues received from premiums,
premium surcharges, and amounts on deposit in the public security
obligation revenue fund, together with any public security reserve
fund, as provided in the proceedings authorizing the public
securities and related credit agreements.
(e) An amount owed by the board under a credit agreement
shall be payable from and secured by a pledge of revenues received
by the association or amounts from the obligation trust fund to the
extent provided in the proceedings authorizing the credit
agreement.
Sec. 2210.610. PUBLIC SECURITY PAYMENTS. (a) Revenues
received from the premium surcharges under Section 2210.612 or
2210.613 may be applied only as provided by this subchapter.
(b) The association may pay public security obligations
with other legally available funds.
(c) Public security obligations are payable only from
sources provided for payment in this subchapter.
Sec. 2210.611. EXCESS REVENUE COLLECTIONS AND INVESTMENT
EARNINGS. Revenue collected in any year from a premium surcharge
under Section 2210.612 or 2210.613 that exceeds the amount of the
public security obligations and public security administrative
expenses payable in that year and interest earned on the public
security obligation fund may, in the discretion of the association,
be:
(1) used to pay public security obligations payable in
the subsequent year, offsetting the amount of the premium surcharge
that would otherwise be required to be levied for the year under
this subchapter;
(2) used to redeem or purchase outstanding public
securities; or
(3) deposited in the catastrophe reserve trust fund.
Sec. 2210.612. CLASS 1 PREMIUM SURCHARGE; REPAYMENT OF
AMOUNTS OWED UNDER FINANCIAL INSTRUMENTS. (a) Each insurer, the
association, and the Texas FAIR Plan Association shall collect from
their policyholders a surcharge in addition to any premiums to pay:
(1) public security obligations and public security
administrative expenses, if any, on Class 1 public securities; and
(2) principal and interest on any financial
instruments entered into by the association under Section 2210.074.
(b) The association shall determine the premium surcharge
at least annually.
(c) On approval by the commissioner, each insurer, the
association, and the Texas FAIR Plan Association shall assess a
premium surcharge to its policyholders as provided by this section.
The premium surcharge must be set in an amount sufficient to pay all
debt service not already covered by available funds and all related
expenses on the public securities or financial instruments, as
applicable. The premium surcharge shall be assessed on all
policyholders who reside or have operations in, or whose insured
property is located in a catastrophe area.
(d) The percent of premium assessed as surcharges to all
policies issued or renewed by the association must be at least twice
the percent of premium assessed as surcharges to all other
policies.
(e) The association shall collect the premium surcharge
from its policyholders. Each insurer and the Texas FAIR Plan
Association shall collect the premium surcharge from their affected
policyholders and shall remit the premium surcharge to the
association as required by commissioner rule.
(f) A premium surcharge under this section shall apply to
all policies that provide coverage on any premises, locations,
operations, or property located in the area described by Subsection
(c) for all property and casualty lines of insurance, other than
federal flood insurance, workers' compensation insurance, accident
and health insurance, and medical malpractice insurance.
(g) A premium surcharge under this section is a separate
nonrefundable charge in addition to the premiums collected and is
not subject to premium tax or commissions. Failure to pay the
surcharge by a policyholder constitutes failure to pay premium for
purposes of policy cancellation.
Sec. 2210.613. CLASS 2 PREMIUM SURCHARGE; REPAYMENT OF
AMOUNTS OWED UNDER FINANCIAL INSTRUMENTS. (a) Each insurer, the
association, and the Texas FAIR Plan Association shall collect from
their policyholders a premium surcharge to pay:
(1) public security obligations and public security
administrative expenses, if any, on Class 2 public securities
issued under Section 2210.075;
(2) public security obligations and public security
administrative expenses, if any, on Class 2 public securities
issued under Section 2210.077;
(3) public security obligations and public security
administrative expenses, if any, on Class 2 public securities
issued under Section 2210.078;
(4) principal and interest on financial instruments
entered into by the association under Section 2210.075; or
(5) principal and interest on financial instruments
entered into by the association under Section 2210.077.
(b) The association shall determine the premium surcharge
at least annually.
(c) On approval by the commissioner, each insurer, the
association, and the Texas FAIR Plan Association shall assess a
premium surcharge to its policyholders as provided by this section.
The premium surcharge must be set in an amount sufficient to pay all
debt service and all related expenses on the public securities or
financial instruments, as applicable.
(d) Each insurer, the association, and the Texas FAIR Plan
Association shall collect the premium surcharge under this section
from their policyholders who have a property or casualty policy
that provides coverage for premises, locations, operations, or
property located in this state, and shall remit the premium
surcharge to the association as required by commissioner rule.
(e) A premium surcharge under this section shall apply to
all policies that provide coverage on any premises, locations,
operations, or property located in this state for all property and
casualty lines of insurance, other than federal flood insurance,
workers' compensation insurance, accident and health insurance,
and medical malpractice insurance. The premium surcharge does not
apply to premiums charged for any premises, locations, operations,
or property located outside this state.
(f) Seventy percent of a premium surcharge assessed under
Subsection (a)(1), (2), (4), or (5) must be assessed on
policyholders who have a property or casualty policy that provides
coverage for premises, locations, operations, or property located
in a catastrophe area.
(g) With respect to the premium surcharge assessed under
Subsection (a)(1), (2), (4), or (5) in accordance with Subsection
(f), the percent of premium assessed as surcharges to all policies
issued or renewed by the association must be at least twice the
percent of premium assessed as surcharges to all other new or
renewal policies.
(h) A premium surcharge under this section is a separate
nonrefundable charge in addition to the premiums collected and is
not subject to premium tax or commissions. Failure to pay the
surcharge by a policyholder constitutes failure to pay premium for
purposes of policy cancellation.
Sec. 2210.614. REFINANCING PUBLIC SECURITIES. The
association may request the board to refinance any public
securities issued in accordance with Subchapter B-1, whether Class
1 or Class 2 public securities, with the refinanced public
securities payable from the same sources as the original public
securities.
Sec. 2210.615. SOURCE OF PAYMENT; STATE DEBT NOT CREATED.
(a) A public security or credit agreement is payable solely from
revenue as provided by this subchapter.
(b) A public security issued under this subchapter, and any
related credit agreement, is not a debt of this state or any state
agency or political subdivision of this state, and does not
constitute a pledge of the faith and credit of this state or any
state agency or political subdivision of this state.
(c) Each public security, and any related credit agreement,
issued under this subchapter must state on the security's face
that:
(1) neither the state nor a state agency, political
corporation, or political subdivision of the state is obligated to
pay the principal of or interest on the public security except as
provided by this subchapter; and
(2) neither the faith and credit nor the taxing power
of the state or any state agency, political corporation, or
political subdivision of the state is pledged to the payment of the
principal of or interest on the public security.
Sec. 2210.616. STATE NOT TO IMPAIR PUBLIC SECURITY
OBLIGATIONS. If public securities under this subchapter are
outstanding, the state may not:
(1) take action to limit or restrict the rights of the
association to fulfill its responsibility to pay public security
obligations; or
(2) in any way impair the rights and remedies of the
public security owners until the public securities are fully
discharged.
Sec. 2210.617. ENFORCEMENT BY MANDAMUS. A writ of mandamus
and any other legal and equitable remedies are available to a party
at interest to require the association or another party to fulfill
an agreement and to perform functions and duties under:
(1) this subchapter;
(2) the Texas Constitution; or
(3) a relevant public security resolution.
Sec. 2210.618. EXEMPTION FROM TAXATION. A public security
issued under this subchapter, any transaction relating to the
public security, and profits made from the sale of the public
security are exempt from taxation by this state or by a municipality
or other political subdivision of this state.
Sec. 2210.619. NO PERSONAL LIABILITY. The members of the
association, members of the association board of directors,
association employees, the board, the employees of the Texas Public
Finance Authority, the commissioner, and department employees are
not personally liable as a result of exercising the rights and
responsibilities granted under this subchapter.
Sec. 2210.620. AUTHORIZED INVESTMENTS. Public securities
issued under this subchapter are authorized investments under:
(1) Subchapter B, Chapter 424;
(2) Subchapter C, Chapter 425; and
(3) Sections 425.203-425.213.
SECTION 37. Section 2211.104, Insurance Code, is amended by
amending Subsections (a), (b), and (c) and adding Subsection (f) to
read as follows:
(a) Except as provided by Subsection (f), if [If] the
association incurs a deficit, the association, at the
commissioner's direction, shall:
(1) request the issuance of public securities as
authorized by Subchapter E; or
(2) assess participating insurers in accordance with
this section.
(b) Except as provided by Subsection (f), as [As]
reimbursement for assessments paid under this section or service
fees paid under Section 2211.209, each insurer may charge a premium
surcharge on every property insurance policy insuring property in
this state that the insurer issues, the effective date of which is
within the three-year period beginning on the 90th day after the
date of the assessment or the 90th day after the date the service
fee under Section 2211.209 is paid, as applicable.
(c) Except as provided by Subsection (f), insurers [The
insurer] shall compute the amount of the surcharge under Subsection
(b) as a uniform percentage of the premium on each policy described
by Subsection (b). The percentage must be equal to one-third of
the ratio of the amount of the participating insurer's assessment
or service fee payment to the amount of the insurer's direct earned
premiums, as reported to the department in the insurer's financial
statement for the calendar year preceding the year in which the
assessment or service fee payment is made so that, over the
three-year period, the aggregate of all surcharges by the insurer
under this section is at least equal to the amount of the assessment
or service fee payment.
(f) In the event of an occurrence or series of occurrences
resulting in deficits for the association and the Texas Windstorm
Insurance Association, the commissioner may adopt rules in the
manner provided by Subchapter A, Chapter 36, to provide for the
coordinated recoupment of those deficits. The rules may not
provide for a recoupment of assessments through premium tax
credits.
SECTION 38. 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 39. 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 40. The following laws are repealed:
(1) Sections 2210.003(5) and (12), Insurance Code;
(2) Sections 2210.058 and 2210.059, Insurance Code;
(3) Sections 2210.256 and 2210.257, Insurance Code;
(4) Sections 2210.356 and 2210.359, Insurance Code;
and
(5) Subchapter G, Chapter 2210, Insurance Code.
SECTION 41. (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 effective December 31, 2009.
(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, not later than December 31, 2009.
(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 December 31, 2009. 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 42. (a) The commissioner of insurance shall adopt
rules as required by Chapter 2210, Insurance Code, as amended by
this Act, not later than the 180th day after the effective date of
this Act.
(b) The Texas Windstorm Insurance Association, through the
board of directors of that association, shall propose to the
commissioner of insurance amendments to the association's plan of
operation as required by Chapter 2210, Insurance Code, as amended
by this Act, not later than March 1, 2010.
SECTION 43. Section 2210.202, Insurance Code, as amended by
this Act, applies to an application for insurance coverage
submitted to the Texas Windstorm Insurance Association on or after
the effective date of this Act.
SECTION 44. Section 2210.251, Insurance Code, as amended by
this Act, applies to an inspection conducted by the Texas Windstorm
Insurance Association on or after September 1, 2009. Except as
otherwise specifically provided by that section, a structure that
has been inspected and is the subject of a certificate of compliance
issued by the Texas Department of Insurance under Section
2210.251(f), Insurance Code, as that section existed immediately
before September 1, 2009, is not required to obtain an inspection
certificate from the Texas Windstorm Insurance Association to
remain eligible for insurance coverage through that association
unless the structure is altered, remodeled, enlarged, or repaired
on or after September 1, 2009.
SECTION 45. The changes in law made by this Act in amending
Sections 2210.251, 2210.254, and 2210.255, Insurance Code, adding
Section 2210.2565, Insurance Code, and repealing Section 2210.256,
Insurance Code, take effect September 1, 2009.
SECTION 46. Notwithstanding Section 2210.071, Insurance
Code, as added by this Act, the Texas Windstorm Insurance
Association shall assess its members for the initial annual
reserves solvency assessment under that section not later than the
30th day after the effective date of this Act.
SECTION 47. Except as otherwise provided by this Act, 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.