Texas 2009 - 81st Regular

Texas Senate Bill SB14 Compare Versions

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1	1	81R35396 PB-D
2	2	By: Fraser S.B. No. 14
3	3	Substitute the following for S.B. No. 14:
4	4	By: Smithee C.S.S.B. No. 14
5	5
6	6
7	7	A BILL TO BE ENTITLED
8	8	AN ACT
9	9	relating to the operation of the Texas Windstorm Insurance
10	10	Association and the Texas FAIR Plan Association; making an
11	11	appropriation.
12	12	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
13	13	SECTION 1. Section 2210.001, Insurance Code, is amended to
14	14	read as follows:
15	15	Sec. 2210.001. PURPOSE. The primary purpose of the Texas
16	16	Windstorm Insurance Association is the provision of an [An]
17	17	adequate market for windstorm and[,] hail[, and fire] insurance in
18	18	the seacoast territory of this state. The legislature finds that
19	19	the provision of adequate windstorm and hail insurance is necessary
20	20	to the economic welfare of this state, and without that insurance,
21	21	the orderly growth and development of this state would be severely
22	22	impeded. This chapter provides a method by which adequate
23	23	windstorm and[,] hail[, and fire] insurance may be obtained in
24	24	certain designated portions of the seacoast territory of this
25	25	state. The association is intended to serve as a residual insurer
26	26	of last resort for windstorm and hail insurance in the seacoast
27	27	territory. The association shall:
28	28	(1) function in such a manner as to not be a direct
29	29	competitor in the private market; and
30	30	(2) provide windstorm and hail insurance coverage to
31	31	those who are unable to obtain that coverage in the private market.
32	32	SECTION 2. Section 2210.002, Insurance Code, is amended to
33	33	read as follows:
34	34	Sec. 2210.002. SHORT TITLE; SUNSET PROVISION. (a) This
35	35	chapter may be cited as the Texas Windstorm Insurance Association
36	36	Act.
37	37	(b) The association is subject to review under Chapter 325,
38	38	Government Code (Texas Sunset Act), but is not abolished under that
39	39	chapter. The association shall be reviewed during the period in
40	40	which state agencies abolished in 2015 are reviewed. The
41	41	association shall pay the costs incurred by the Sunset Advisory
42	42	Commission in performing the review of the association under this
43	43	subsection. The Sunset Advisory Commission shall determine the
44	44	costs of the review performed under this subsection, and the
45	45	association shall pay the amount of those costs promptly on receipt
46	46	of a statement from the Sunset Advisory Commission regarding those
47	47	costs. This subsection expires September 1, 2015.
48	48	SECTION 3. Subchapter A, Chapter 2210, Insurance Code, is
49	49	amended by adding Section 2210.0025 to read as follows:
50	50	Sec. 2210.0025. BIENNIAL REPORT TO LEGISLATURE. On or
51	51	before December 31 of each even-numbered year, the board of
52	52	directors shall submit to the commissioner, the appropriate
53	53	committees of each house of the legislature, and the Sunset
54	54	Advisory Commission a written report relating to the operations of
55	55	the association during the preceding biennium. The report must
56	56	include:
57	57	(1) any proposed changes in the laws relating to
58	58	regulation of the association and a statement of the reasons for the
59	59	changes; and
60	60	(2) any information regarding association operations
61	61	or procedures that is requested by the department to be addressed in
62	62	the report.
63	63	SECTION 4. Section 2210.003, Insurance Code, is amended by
64	64	adding Subdivisions (3-a) and (3-b) and amending Subdivision (6) to
65	65	read as follows:
66	66	(3-a) "Catastrophe reserve trust fund" means the trust
67	67	fund established under Subchapter J.
68	68	(3-b) "Financial instruments" means insurance and
69	69	other financial devices, as approved by the commissioner, that may
70	70	be used to provide funding for payment of excess losses of the
71	71	association.
72	72	(6) "Insurance" means Texas [fire and explosion
73	73	insurance and Texas] windstorm and hail insurance.
74	74	SECTION 5. Subsection (a), Section 2210.004, Insurance
75	75	Code, is amended to read as follows:
76	76	(a) Except as provided by Subsection (h), for purposes of
77	77	this chapter and subject to this section, "insurable property"
78	78	means immovable property at a fixed location in a catastrophe area
79	79	or corporeal movable property located in that immovable property,
80	80	as designated in the plan of operation, that is determined by the
81	81	association according to the criteria specified in the plan of
82	82	operation to be in an insurable condition against windstorm and
83	83	hail [or fire and explosion, as appropriate], as determined by
84	84	normal underwriting standards. The term includes property
85	85	described by Section 2210.209.
86	86	SECTION 6. Section 2210.005, Insurance Code, is amended to
87	87	read as follows:
88	88	Sec. 2210.005. DESIGNATION AS CATASTROPHE AREA [OR
89	89	INADEQUATE FIRE INSURANCE AREA]; REVOCATION OF DESIGNATION.
90	90	(a) After at least 10 days' notice and a hearing, the commissioner
91	91	may designate an area of the seacoast territory of this state as a
92	92	catastrophe area if the commissioner determines, unless such a
93	93	determination results in an adverse impact to the exposure of the
94	94	association, that windstorm and hail insurance is not reasonably
95	95	available to a substantial number of the owners of insurable
96	96	property located in that territory because the territory is subject
97	97	to unusually frequent and severe damage resulting from windstorms
98	98	or hailstorms.
99	99	(b) [After at least 10 days' notice and a hearing, the
100	100	commissioner may designate an area of this state as an inadequate
101	101	fire insurance area if the commissioner determines that fire and
102	102	explosion insurance is not reasonably available to a substantial
103	103	number of owners of insurable property located in that area.
104	104	[(c)] The commissioner shall revoke a designation made
105	105	under Subsection (a) [or (b)] if the commissioner determines, after
106	106	at least 10 days' notice and a hearing, that the applicable
107	107	insurance coverage is no longer reasonably unavailable to a
108	108	substantial number of owners of insurable property within the
109	109	designated territory.
110	110	(c) [(d)] If the association determines that windstorm and
111	111	hail insurance [or fire and explosion insurance] is no longer
112	112	reasonably unavailable to a substantial number of owners of
113	113	insurable property in a territory designated as a catastrophe area
114	114	[or inadequate fire insurance area, as applicable], the association
115	115	may request in writing that the commissioner revoke the
116	116	designation. After at least 10 days' notice and a hearing, but not
117	117	later than the 30th day after the date of the hearing, the
118	118	commissioner shall:
119	119	(1) approve the request and revoke the designation; or
120	120	(2) reject the request.
121	121	SECTION 7. Section 2210.008, Insurance Code, is amended to
122	122	read as follows:
123	123	Sec. 2210.008. DEPARTMENT ORDERS; GENERAL RULEMAKING
124	124	AUTHORITY. (a) After notice and hearing as provided by Subsection
125	125	(b), the commissioner may issue any orders that the commissioner
126	126	considers necessary to implement this chapter[, including orders
127	127	regarding maximum rates, competitive rates, and policy forms].
128	128	(b) Before the commissioner adopts an order, the department
129	129	shall post notice of the hearing on the order at the secretary of
130	130	state's office in Austin and shall hold a hearing to consider the
131	131	proposed order. Any person may appear at the hearing and testify
132	132	for or against the adoption of the order.
133	133	(c) The commissioner may adopt rules in the manner
134	134	prescribed by Subchapter A, Chapter 36, as reasonable and necessary
135	135	to implement this chapter.
136	136	SECTION 8. Subchapter A, Chapter 2210, Insurance Code, is
137	137	amended by adding Sections 2210.009 and 2210.010 to read as
138	138	follows:
139	139	Sec. 2210.009. LIST OF PRIVATE INSURERS; INCENTIVE PLAN.
140	140	(a) The department shall maintain a list of all insurers that
141	141	engage in the business of property and casualty insurance in the
142	142	voluntary market in the seacoast territory.
143	143	(b) The department shall develop incentive programs in the
144	144	manner described by Section 2210.053(b) to encourage authorized
145	145	insurers to write insurance on a voluntary basis and to minimize the
146	146	use of the association as a means to obtain insurance.
147	147	Sec. 2210.010. AUDIT. The state auditor shall conduct an
148	148	audit of the association at least once every four years.
149	149	SECTION 9. Section 2210.052, Insurance Code, is amended by
150	150	amending Subsections (a) and (d) and adding Subsection (e) to read
151	151	as follows:
152	152	(a) Each member of the association shall participate in
153	153	insured losses and operating expenses of the association, in excess
154	154	of premium and other revenue [the writings, expenses, profits, and
155	155	losses] of the association, in the proportion that the net direct
156	156	premiums of that member during the preceding calendar year bears to
157	157	the aggregate net direct premiums by all members of the
158	158	association, as determined using the information provided under
159	159	Subsection (b).
160	160	(d) Notwithstanding Subsection (a), a member, in accordance
161	161	with the plan of operation, is entitled to receive credit for
162	162	similar insurance voluntarily written in areas [an area] designated
163	163	by the commissioner. The member's participation in the insured
164	164	losses and operating expenses of the association in excess of
165	165	premium and other revenue [writings] of the association shall be
166	166	reduced in accordance with the plan of operation.
167	167	(e) Notwithstanding Subsections (a)-(d), an insurer that
168	168	becomes a member of the association and that has not previously been
169	169	a member of the association is not subject to participation in any
170	170	insured losses and operating expenses of the association in excess
171	171	of premium and other revenue of the association until the second
172	172	anniversary of the date on which the insurer first becomes a member
173	173	of the association.
174	174	SECTION 10. Subsection (b), Section 2210.056, Insurance
175	175	Code, is amended to read as follows:
176	176	(b) The association's assets may not be used for or diverted
177	177	to any purpose other than to:
178	178	(1) satisfy, in whole or in part, the liability of the
179	179	association on claims made on policies written by the association;
180	180	(2) make investments authorized under applicable law;
181	181	(3) pay reasonable and necessary administrative
182	182	expenses incurred in connection with the operation of the
183	183	association and the processing of claims against the association;
184	184	[or]
185	185	(4) satisfy, in whole or in part, the obligations of
186	186	the association incurred in connection with Subchapters B-1, J, and
187	187	M, including reinsurance and public securities, and any financial
188	188	instruments; or
189	189	(5) make remittance under the laws of this state to be
190	190	used by this state to:
191	191	(A) pay claims made on policies written by the
192	192	association;
193	193	(B) purchase reinsurance covering losses under
194	194	those policies; or
195	195	(C) prepare for or mitigate the effects of
196	196	catastrophic natural events.
197	197	SECTION 11. Subsection (c), Section 2210.060, Insurance
198	198	Code, is amended to read as follows:
199	199	(c) Subsection (a) does not authorize the association to
200	200	indemnify a member of the association for participating in the
201	201	assessments made by [writings, expenses, profits, and losses of]
202	202	the association in the manner provided by this chapter.
203	203	SECTION 12. Chapter 2210, Insurance Code, is amended by
204	204	adding Subchapter B-1 to read as follows:
205	205	SUBCHAPTER B-1. PAYMENT OF LOSSES
206	206	Sec. 2210.071. PAYMENT OF EXCESS LOSSES; PAYMENT FROM
207	207	RESERVES AND TRUST FUND. (a) If an occurrence or series of
208	208	occurrences in a catastrophe area results in insured losses and
209	209	operating expenses of the association in excess of premium and
210	210	other revenue of the association, the excess losses and operating
211	211	expenses shall be paid as provided by this subchapter.
212	212	(b) The association shall pay losses in excess of premium
213	213	and other revenue of the association from available reserves of the
214	214	association.
215	215	(c) Losses in excess of the available reserves of the
216	216	association shall be paid from available amounts in the catastrophe
217	217	reserve trust fund.
218	218	Sec. 2210.072. PAYMENT FROM CLASS 1 PUBLIC SECURITIES. (a)
219	219	Losses not paid under Section 2210.071 shall be paid as provided by
220	220	this section from the proceeds from Class 1 public securities
221	221	authorized to be issued in accordance with Subchapter M before the
222	222	date of any occurrence that results in insured losses.
223	223	(b) Public securities described by Subsection (a) may be
224	224	issued if the board of directors determines, before the date of any
225	225	occurrence, that the amount available from premium and other
226	226	revenue, in combination with the amounts available from the
227	227	catastrophe reserve trust fund, may be insufficient to pay insured
228	228	losses. The public securities shall be issued as necessary in a
229	229	principal amount not to exceed $300 million per occurrence.
230	230	(c) Any public securities proceeds received under this
231	231	section from Class 1 public securities authorized in accordance
232	232	with Subchapter M before the date of any occurrence that results in
233	233	insured losses under Subsection (a):
234	234	(1) must be used before the proceeds of any public
235	235	securities that the association authorizes to be issued under
236	236	Section 2210.073 on or after any catastrophic event; and
237	237	(2) may not be used to fund losses of any catastrophic
238	238	event occurring before the date public securities described by this
239	239	section are authorized to be issued.
240	240	(d) If the losses are paid with public securities described
241	241	by this section, the public securities shall be repaid as
242	242	prescribed by Subchapter M.
243	243	Sec. 2210.073. PAYMENT FROM CLASS 2 PUBLIC SECURITIES. (a)
244	244	Losses not paid under Sections 2210.071 and 2210.072 shall be paid
245	245	as provided by this section from proceeds from Class 2 public
246	246	securities authorized to be issued in accordance with Subchapter M
247	247	on or after the date of any occurrence that results in insured
248	248	losses under this subsection.
249	249	(b) Public securities described by Subsection (a) may be
250	250	issued as necessary in a principal amount not to exceed $300 million
251	251	per occurrence.
252	252	(c) If the losses are paid with public securities described
253	253	by this section, the public securities shall be repaid as
254	254	prescribed by Subchapter M.
255	255	Sec. 2210.074. PAYMENT THROUGH NONRECOUPABLE MEMBER
256	256	ASSESSMENTS. (a) Losses not paid under Sections 2210.071,
257	257	2210.072, and 2210.073 shall be paid through member assessments as
258	258	provided by this section. The association shall assess the members
259	259	of the association an amount not to exceed $300 million per
260	260	occurrence for the payment of the losses. The association shall
261	261	notify each member of the association of the amount of the member's
262	262	assessment under this section.
263	263	(b) The proportion of the losses allocable to each insurer
264	264	under this section shall be determined in the manner used to
265	265	determine each insurer's participation in the association for the
266	266	year under Section 2210.052.
267	267	(c) A member of the association may not recoup an assessment
268	268	paid under this section through a premium surcharge or tax credit.
269	269	Sec. 2210.075. PAYMENT THROUGH RECOUPABLE MEMBER
270	270	ASSESSMENTS. (a) Losses not paid under Sections 2210.071-2210.074
271	271	shall be paid through member assessments as provided by this
272	272	section. The association shall assess the members of the
273	273	association an amount not to exceed $100 million per occurrence for
274	274	the payment of the losses. The association shall notify each member
275	275	of the association of the amount of the member's assessment under
276	276	this section.
277	277	(b) The proportion of the losses allocable to each insurer
278	278	under this section shall be determined in the manner used to
279	279	determine each insurer's participation in the association for the
280	280	year under Section 2210.052.
281	281	(c) The assessments shall be repaid by a nonrefundable
282	282	premium surcharge collected under this section in an amount set by
283	283	the commissioner. The association and each insurer shall collect
284	284	from each of its policyholders who reside in or have operations in,
285	285	or whose insured property is located in, a catastrophe area, the
286	286	nonrefundable premium surcharge for each Texas windstorm and hail
287	287	insurance policy and each property and casualty insurance policy
288	288	issued by the insurer for property located in the catastrophe area.
289	289	(d) A premium surcharge under this section applies to all
290	290	policies that provide coverage on any premises, locations,
291	291	operations, or property located in the area described by Subsection
292	292	(c) for all property and casualty lines of insurance, other than
293	293	federal flood insurance, workers' compensation insurance, accident
294	294	and health insurance, and medical malpractice insurance.
295	295	(e) A premium surcharge under this section is a separate
296	296	nonrefundable charge in addition to the premiums collected and is
297	297	not subject to premium tax or commissions. Failure by a
298	298	policyholder to pay the surcharge constitutes failure to pay
299	299	premium for purposes of policy cancellation.
300	300	Sec. 2210.076. PAYMENT THROUGH REINSURANCE. (a) Losses
301	301	not paid under Sections 2210.071-2210.075 shall be paid through
302	302	reinsurance as provided by this section.
303	303	(b) The association shall purchase reinsurance in an amount
304	304	not to exceed $1 billion. The cost of the reinsurance purchased
305	305	under this section shall be paid from premium paid by the
306	306	policyholders of the association and other revenue of the
307	307	association.
308	308	Sec. 2210.077. PAYMENT FROM ADDITIONAL ASSOCIATION
309	309	ASSESSMENTS. (a) Losses not paid under Sections 2210.071-2210.076
310	310	shall be paid through member assessments as provided by this
311	311	section.
312	312	(b) The association shall assess the members of the
313	313	association an amount not to exceed $750 million per occurrence for
314	314	the payment of losses described by this section. The association
315	315	shall notify each member of the association of the amount of the
316	316	member's assessments under this section, with the proportion of the
317	317	assessment allocable to each insurer determined in the manner used
318	318	to determine each member's participation in the association under
319	319	Section 2210.052.
320	320	(c) A member of the association may not recoup an assessment
321	321	paid under this section through a premium surcharge.
322	322	(d) A member of the association may credit an amount paid in
323	323	accordance with this section in a calendar year against the
324	324	insurer's premium tax under Chapter 221. The tax credit authorized
325	325	under this subsection shall be allowed at a rate not to exceed 20
326	326	percent per year for five or more successive years beginning the
327	327	calendar year that the assessments under this section are paid. The
328	328	balance of payments made by the insurer and not claimed as a premium
329	329	tax credit may be reflected in the books and records of the insurer
330	330	as an admitted asset of the insurer for all purposes, including
331	331	exhibition in an annual statement under Section 862.001.
332	332	Sec. 2210.078. NOTIFICATION REGARDING TAX CREDITS. (a)
333	333	The association shall immediately notify the department if an
334	334	occurrence or series of occurrences in a catastrophe area results
335	335	in insured losses that result in a tax credit under Section
336	336	2210.077(d) in a calendar year.
337	337	(b) On receipt of notice under Subsection (a), the
338	338	department shall immediately notify the governor and the
339	339	appropriate committees of each house of the legislature of the
340	340	amount of insured losses eligible for tax credits under Section
341	341	2210.077(d).
342	342	Sec. 2210.079. COMBINATION OF FINANCING MECHANISMS.
343	343	Notwithstanding any other provision of this subchapter, if the
344	344	board of directors determines that the sale of public securities or
345	345	the purchase of reinsurance is not possible, or that other
346	346	financing mechanisms described by this subchapter are fiscally
347	347	appropriate or economically beneficial to this state, the board of
348	348	directors, with the approval of the commissioner, may use any
349	349	combination of the financing arrangements described by this
350	350	subchapter as necessary to pay the excess losses.
351	351	SECTION 13. The heading to Subchapter C, Chapter 2210,
352	352	Insurance Code, is amended to read as follows:
353	353	SUBCHAPTER C. ASSOCIATION BOARD OF DIRECTORS; GENERAL
354	354	POWERS AND DUTIES OF BOARD OF DIRECTORS
355	355	SECTION 14. Section 2210.102, Insurance Code, is amended to
356	356	read as follows:
357	357	Sec. 2210.102. COMPOSITION. (a) The board of directors is
358	358	composed of [the following] nine members appointed by the
359	359	commissioner in accordance with this section.
360	360	(b) Four members must be [: (1) five] representatives of
361	361	the insurance industry.
362	362	(c) Four members must [different insurers who are members of
363	363	the association, elected by the members as provided by the plan of
364	364	operation;
365	365	[(2) two public representatives who are nominated by
366	366	the office of public insurance counsel and who], as of the date of
367	367	the appointment, [:
368	368	[(A)] reside in the first tier coastal counties. At
369	369	least one of the members appointed under this subsection must be a
370	370	[catastrophe area; and
371	371	[(B) are policyholders of the association; and
372	372	[(3) two] property and casualty agent who is licensed
373	373	under this code and is not a captive agent.
374	374	(d) One member must be a representative of an area of this
375	375	state that is not located in the seacoast territory with
376	376	demonstrated expertise in insurance and actuarial principles.
377	377	(e) All members must [agents, each of whom must:
378	378	[(A)] have demonstrated experience in insurance,
379	379	general business, or actuarial principles sufficient to make the
380	380	success of the association probable[;
381	381	[(B) maintain the agent's principal office, as of
382	382	the date of the appointment, in a catastrophe area; and
383	383	[(C) hold a license under Chapter 4051 as a
384	384	general property and casualty agent or a personal lines property
385	385	and casualty agent].
386	386	(f) Insurers who are members of the association shall
387	387	nominate, from among those members, persons to fill any vacancy in
388	388	the four board of director seats reserved for representatives of
389	389	the insurance industry. The board of directors shall solicit
390	390	nominations from the members and submit the nominations to the
391	391	commissioner. The nominee slate submitted to the commissioner
392	392	under this subsection must include at least three more names than
393	393	the number of vacancies. The commissioner shall appoint
394	394	replacement insurance industry representatives from the nominee
395	395	slate.
396	396	(g) The commissioner shall appoint one person to serve as a
397	397	nonvoting member of the board to advise the board regarding issues
398	398	relating to the inspection process. The commissioner may give
399	399	preference in an appointment under this subsection to a person who
400	400	is a qualified inspector under Section 2210.254. The nonvoting
401	401	member appointed under this section must:
402	402	(1) be an engineer licensed by, and in good standing
403	403	with, the Texas Board of Professional Engineers;
404	404	(2) reside in a first tier coastal county; and
405	405	(3) be knowledgeable of, and have professional
406	406	expertise in, wind-related design and construction practices in
407	407	coastal areas that are subject to high winds and hurricanes.
408	408	(h) [(b)] The persons appointed under Subsection (c)
409	409	[Subsections (a)(2) and (3)] must be from different counties.
410	410	SECTION 15. Section 2210.103, Insurance Code, is amended by
411	411	adding Subsection (c) to read as follows:
412	412	(c) A member of the board of directors may be removed by the
413	413	commissioner for misconduct, refusal to serve, or other failure to
414	414	comply with this chapter or rules adopted under this chapter. The
415	415	cause of the removal must be stated in writing and posted on the
416	416	association's website. The commissioner shall appoint a
417	417	replacement in the manner provided by Section 2210.102 for a member
418	418	who leaves or is removed from the board of directors.
419	419	SECTION 16. Section 2210.104, Insurance Code, is amended to
420	420	read as follows:
421	421	Sec. 2210.104. OFFICERS. The board of directors shall
422	422	elect from the board's membership an executive committee consisting
423	423	of a presiding officer, assistant presiding officer, and
424	424	secretary-treasurer. [At least one of the officers must be a member
425	425	appointed under Section 2210.102(a)(2) or (3).]
426	426	SECTION 17. Section 2210.105, Insurance Code, is amended by
427	427	adding Subsection (d) to read as follows:
428	428	(d) Except for an emergency meeting, a meeting of the board
429	429	of directors shall be held at a location as determined by the board
430	430	of directors.
431	431	SECTION 18. Subchapter C, Chapter 2210, Insurance Code, is
432	432	amended by adding Section 2210.1051 to read as follows:
433	433	Sec. 2210.1051. MEETINGS OF BOARD OF DIRECTORS.
434	434	(a) Notwithstanding Chapter 551, Government Code, or any other
435	435	law, members of the board of directors may meet by telephone
436	436	conference call, videoconference, or other similar
437	437	telecommunication method. The board may use telephone conference
438	438	call, videoconference, or other similar telecommunication method
439	439	for purposes of establishing a quorum or voting or for any other
440	440	meeting purpose in accordance with this subsection and Subsection
441	441	(b). This subsection applies without regard to the subject matter
442	442	discussed or considered by the members of the board at the meeting.
443	443	(b) A meeting held by telephone conference call,
444	444	videoconference, or other similar telecommunication method:
445	445	(1) is subject to the notice requirements applicable
446	446	to other meetings of the board of directors;
447	447	(2) may not be held unless notice of the meeting
448	448	specifies the location of the meeting, which shall be located in a
449	449	tier one county; a recording of these meetings shall be posted on
450	450	the association's website;
451	451	(3) must be audible to the public at the location
452	452	specified in the notice under Subdivision (2); and
453	453	(4) must provide two-way audio communication between
454	454	all members of the board attending the meeting during the entire
455	455	meeting, and if the two-way audio communication link with members
456	456	attending the meeting is disrupted so that a quorum of the board is
457	457	no longer participating in the meeting, the meeting may not
458	458	continue until the two-way audio communication link is
459	459	reestablished.
460	460	SECTION 19. Subchapter C, Chapter 2210, Insurance Code, is
461	461	amended by adding Section 2210.107 to read as follows:
462	462	Sec. 2210.107. PRIMARY BOARD OBJECTIVES. The primary
463	463	objectives of the board of directors are to ensure that the
464	464	association:
465	465	(1) operates in accordance with this chapter and
466	466	commissioner rules;
467	467	(2) complies with sound insurance principles; and
468	468	(3) meets all standards imposed under this chapter.
469	469	SECTION 20. Section 2210.151, Insurance Code, is amended to
470	470	read as follows:
471	471	Sec. 2210.151. ADOPTION OF PLAN OF OPERATION. With the
472	472	advice of the board of directors, the commissioner by rule shall
473	473	adopt the plan of operation to provide[:
474	474	[(1)] Texas windstorm and hail insurance in a
475	475	catastrophe area[; and
476	476	[(2) Texas fire and explosion insurance in an
477	477	inadequate fire insurance area].
478	478	SECTION 21. Subsection (a), Section 2210.152, Insurance
479	479	Code, is amended to read as follows:
480	480	(a) The plan of operation must:
481	481	(1) provide for the efficient, economical, fair, and
482	482	nondiscriminatory administration of the association; and
483	483	(2) include:
484	484	(A) a plan for the equitable assessment of the
485	485	members of the association to defray losses and expenses;
486	486	(B) underwriting standards;
487	487	(C) procedures for accepting and ceding
488	488	reinsurance;
489	489	(D) procedures for obtaining and repaying
490	490	amounts under any financial instruments authorized under this
491	491	chapter;
492	492	(E) procedures for determining the amount of
493	493	insurance to be provided to specific risks;
494	494	(F) [(E)] time limits and procedures for
495	495	processing applications for insurance; and
496	496	(G) [(F)] other provisions as considered
497	497	necessary by the department to implement the purposes of this
498	498	chapter.
499	499	SECTION 22. Section 2210.202, Insurance Code, is amended to
500	500	read as follows:
501	501	Sec. 2210.202. APPLICATION FOR COVERAGE. (a) A person who
502	502	has an insurable interest in insurable property may apply to the
503	503	association for insurance coverage provided under the plan of
504	504	operation and an inspection of the property, subject to any rules[,
505	505	including any inspection fee,] established by the board of
506	506	directors and approved by the commissioner. The association shall
507	507	make insurance available to each applicant in the catastrophe area
508	508	whose property is insurable property but who, after diligent
509	509	efforts, is unable to obtain property insurance through the
510	510	voluntary market, as evidenced by one declination from an insurer
511	511	authorized to engage in the business of, and writing, property
512	512	insurance providing windstorm and hail coverage in the first tier
513	513	coastal counties. For purposes of this section, "declination" has
514	514	the meaning assigned by the plan of operation and shall include a
515	515	refusal to offer coverage for the perils of windstorm and hail and
516	516	the inability to obtain substantially equivalent insurance
517	517	coverage for the perils of windstorm and hail. Notwithstanding
518	518	Section 2210.203(c), evidence of one declination is also required
519	519	with an application for renewal of an association policy.
520	520	(b) A [general] property and casualty agent [or a personal
521	521	lines property and casualty agent] must submit an application for
522	522	the insurance coverage on behalf of the applicant on forms
523	523	prescribed by the association. The application must contain a
524	524	statement as to whether the applicant has submitted or will submit
525	525	the premium in full from personal funds or, if not, to whom a
526	526	balance is or will be due. Each application for initial or renewal
527	527	coverage must also contain a statement that the agent possesses
528	528	proof of the declination described by Subsection (a) and proof of
529	529	flood insurance coverage or unavailability of that coverage as
530	530	described by Section 2210.203(a-1).
531	531	SECTION 23. Section 2210.203, Insurance Code, is amended by
532	532	adding Subsection (a-1) to read as follows:
533	533	(a-1) This subsection applies only to a structure
534	534	constructed, remodeled, or enlarged on or after the effective date
535	535	of S.B. No. 14, Acts of the 81st Legislature, Regular Session, 2009,
536	536	and only for insurable property located in areas designated by the
537	537	commissioner. Notwithstanding Subsection (a), if all or any part
538	538	of the property to which this subsection applies is located in Zone
539	539	V or another similar zone with an additional hazard associated with
540	540	storm waves, as defined by the National Flood Insurance Program,
541	541	and if flood insurance under that federal program is available, the
542	542	association may not issue an insurance policy for initial coverage
543	543	unless evidence that the property is covered by a flood insurance
544	544	policy is submitted to the association. An agent offering or
545	545	selling a Texas windstorm and hail insurance policy in any area
546	546	designated by the commissioner under this subsection shall offer
547	547	flood insurance coverage to the prospective insured, if that
548	548	coverage is available.
549	549	SECTION 24. Section 2210.204, Insurance Code, is amended by
550	550	amending Subsection (d) and adding Subsection (e) to read as
551	551	follows:
552	552	(d) If an insured requests cancellation of the insurance
553	553	coverage, the association shall refund the unearned premium, less
554	554	any minimum retained premium set forth in the plan of operation,
555	555	payable to the insured and the holder of an unpaid balance. The
556	556	property and casualty agent who submitted the application shall
557	557	refund the agent's commission on any unearned premium in the same
558	558	manner.
559	559	(e) For cancellation of insurance coverage under this
560	560	section, the minimum retained premium in the plan of operation must
561	561	be for a period of not less than 180 days, except for events
562	562	specified in the plan of operation that reflect a significant
563	563	change in the exposure or the policyholder concerning the insured
564	564	property, including:
565	565	(1) the purchase of similar coverage in the voluntary
566	566	market;
567	567	(2) sale of the property to an unrelated party;
568	568	(3) death of the policyholder; or
569	569	(4) total loss of the property.
570	570	SECTION 25. Subchapter E, Chapter 2210, Insurance Code, is
571	571	amended by adding Section 2210.2041 to read as follows:
572	572	Sec. 2210.2041. NONREFUNDABLE SURCHARGE. A nonrefundable
573	573	surcharge established under this chapter is not refundable under
574	574	this code for any reason or purpose.
575	575	SECTION 26. Section 2210.251, Insurance Code, is amended to
576	576	read as follows:
577	577	Sec. 2210.251. INSPECTION REQUIREMENTS. (a) Except as
578	578	provided by this section, to be considered insurable property
579	579	eligible for windstorm and hail insurance coverage from the
580	580	association, a structure that is constructed, remodeled, enlarged,
581	581	or repaired or to which additions are made on or after January 1,
582	582	1988, must be inspected [or approved] by the association
583	583	[department] for compliance with the plan of operation.
584	584	(b) After January 1, 2004, for geographic areas specified by
585	585	the commissioner, the commissioner by rule shall adopt the 2003
586	586	International Residential Code for one- and two-family dwellings
587	587	published by the International Code Council. For those geographic
588	588	areas, the commissioner by rule may adopt a subsequent edition of
589	589	that code and may adopt any supplements published by the
590	590	International Code Council and amendments to that code.
591	591	(c) After January 1, 2004, a person must submit a notice of a
592	592	windstorm inspection to the association [unit responsible for
593	593	certification of windstorm inspections at the department] before
594	594	beginning to construct, [alter,] remodel, enlarge, or repair a
595	595	structure.
596	596	(d) A structure constructed, remodeled, enlarged, or
597	597	repaired or to which additions were made before January 1, 1988,
598	598	that is located in an area that was governed at the time of the
599	599	construction, remodeling, enlargement, repair, or addition by a
600	600	building code recognized by the association is insurable property
601	601	eligible for windstorm and hail insurance coverage from the
602	602	association without compliance with the inspection [or approval]
603	603	requirements of this section or the plan of operation.
604	604	(e) A structure constructed, remodeled, enlarged, or
605	605	repaired or to which additions were made before January 1, 1988,
606	606	that is located in an area not governed by a building code
607	607	recognized by the association is insurable property eligible for
608	608	windstorm and hail insurance coverage from the association without
609	609	compliance with the inspection [or approval] requirements of this
610	610	section or the plan of operation if the structure was previously
611	611	insured by an insurer authorized to engage in the business of
612	612	insurance in this state and the structure is in essentially the same
613	613	condition as when previously insured, except for normal wear and
614	614	tear, and is without any structural change other than a change made
615	615	according to code. For purposes of this subsection, evidence of
616	616	previous insurance coverage must reflect coverage for the perils of
617	617	windstorm and hail for the property within the 12-month period
618	618	immediately preceding the date of the application for coverage
619	619	through the association and includes:
620	620	(1) a copy of a previous insurance policy;
621	621	(2) copies of canceled checks or agent's records that
622	622	show payments for previous policies; and
623	623	(3) a copy of the title to the structure or mortgage
624	624	company records that show previous policies.
625	625	(f) Notwithstanding any other provision of this section, a
626	626	residential structure insured by the association as of June 1,
627	627	2009, may continue coverage through the association subject to the
628	628	inspection requirements imposed under Section 2210.258.
629	629	(g) The association [department] shall issue a certificate
630	630	of compliance for each structure that qualifies for coverage. The
631	631	certificate is evidence of insurability of the structure by the
632	632	association.
633	633	[(g) The department may enter into agreements and contracts
634	634	as necessary to implement this section.]
635	635	(h) The association [department] may charge a reasonable
636	636	fee to cover the cost of making building requirements and
637	637	inspection standards available to the public.
638	638	(i) The association shall charge a reasonable fee for each
639	639	inspection of each structure in an amount set by the board of
640	640	directors. The association may use fees collected under
641	641	this section for operating expenses or for the purchase of
642	642	reinsurance.
643	643	(j) Without limitation of the department's authority to
644	644	otherwise enforce this chapter, the department shall monitor the
645	645	association's compliance with this subchapter.
646	646	(k) Except as otherwise provided by this subchapter, the
647	647	association may not consider any request that a structure be
648	648	certified as insurable property if, within six months after the
649	649	final inspection of a structure, the association has not received:
650	650	(1) fully completed documentation verifying that the
651	651	structure has been constructed, remodeled, enlarged, or repaired,
652	652	or any addition to the structure has been made, in compliance with
653	653	the plan of operation; and
654	654	(2) full payment of all inspection fees owed to the
655	655	association, including any fees related to prior association
656	656	inspections.
657	657	(l) If a structure is rejected for coverage under Subsection
658	658	(k), a person may make a new request for certification and the
659	659	structure may be reinspected for compliance with the plan of
660	660	operation. A request for certification brought under this
661	661	subsection must meet the requirements of Subsection (k).
662	662	SECTION 27. Subsections (a), (c), and (d), Section
663	663	2210.254, Insurance Code, are amended to read as follows:
664	664	(a) For purposes of this chapter, a "qualified inspector"
665	665	includes:
666	666	(1) a person determined by the association
667	667	[department] to be qualified because of training or experience to
668	668	perform building inspections;
669	669	(2) a licensed professional engineer who meets the
670	670	requirements specified by the association [commissioner rule] for
671	671	appointment to conduct windstorm inspections; and
672	672	(3) an inspector who:
673	673	(A) is certified by the International Code
674	674	Council, the Building Officials and Code Administrators
675	675	International, Inc., the International Conference of Building
676	676	Officials, or the Southern Building Code Congress International,
677	677	Inc.;
678	678	(B) has certifications as a buildings inspector
679	679	and coastal construction inspector; and
680	680	(C) complies with other requirements specified
681	681	by the association [commissioner rule].
682	682	(c) Before performing building inspections, a qualified
683	683	inspector must be approved and appointed or employed by the
684	684	association [department].
685	685	(d) The association [department] may charge a reasonable
686	686	fee for the filing of applications by and determining the
687	687	qualifications of persons for appointment as qualified inspectors.
688	688	SECTION 28. Section 2210.255, Insurance Code, is amended to
689	689	read as follows:
690	690	Sec. 2210.255. APPOINTMENT OF LICENSED ENGINEER AS
691	691	INSPECTOR. (a) On request of an engineer licensed by the Texas
692	692	Board of Professional Engineers, the association may [commissioner
693	693	shall] appoint the engineer as an inspector under this subchapter
694	694	on receipt of information satisfactory to the association [not
695	695	later than the 10th day after the date the engineer delivers to the
696	696	commissioner information demonstrating] that the engineer is
697	697	qualified to perform windstorm inspections under this subchapter.
698	698	(b) The association shall consult with the commissioner
699	699	regarding [shall adopt rules establishing] the information to be
700	700	considered in appointing engineers under this section.
701	701	SECTION 29. Subchapter F, Chapter 2210, Insurance Code, is
702	702	amended by adding Section 2210.2565 to read as follows:
703	703	Sec. 2210.2565. PROCEDURES REGARDING APPOINTMENT OF
704	704	INSPECTORS. The association shall develop procedures for the
705	705	appointment and oversight of qualified inspectors appointed under
706	706	Sections 2210.254 and 2210.255, including procedures relating to
707	707	the suspension or revocation of an appointment made by the
708	708	association.
709	709	SECTION 30. Subchapter F, Chapter 2210, Insurance Code, is
710	710	amended by adding Sections 2210.258 and 2210.259 to read as
711	711	follows:
712	712	Sec. 2210.258. MANDATORY COMPLIANCE WITH BUILDING CODES;
713	713	ELIGIBILITY. (a) Notwithstanding any other provision of this
714	714	chapter, to be eligible for insurance through the association, all
715	715	construction, remodeling, enlargement, and repair of, or addition
716	716	to, any structure located in the catastrophe area that is begun on
717	717	or after the effective date of S.B. No. 14, Acts of the 81st
718	718	Legislature, Regular Session, 2009, must be performed in compliance
719	719	with the applicable building code standards, as set forth in the
720	720	plan of operation.
721	721	(b) The association may not insure a structure described by
722	722	Subsection (a) until:
723	723	(1) the structure has been inspected for compliance
724	724	with the plan of operation in accordance with Section 2210.251(a);
725	725	and
726	726	(2) a certificate of compliance has been issued for
727	727	the structure in accordance with Section 2210.251(g).
728	728	Sec. 2210.259. SURCHARGE FOR CERTAIN NONCOMPLIANT
729	729	STRUCTURES. (a) A noncompliant residential structure insured by
730	730	the association as of June 1, 2009, under Section 2210.251(f) that
731	731	had been approved for insurability under the approval process
732	732	regulations in effect on June 1, 2009, is subject to an annual
733	733	premium surcharge in an amount equal to 15 percent of the premium
734	734	for insurance coverage obtained through the association. The
735	735	surcharge under this subsection applies to each policy issued or
736	736	renewed by the association on or after the effective date of S.B.
737	737	No. 14, Acts of the 81st Legislature, Regular Session, 2009, and is
738	738	due on the issuance or renewal of the policy.
739	739	(b) A premium surcharge collected under this section shall
740	740	be deposited in the catastrophe reserve trust fund. A premium
741	741	surcharge under this section is a separate nonrefundable charge in
742	742	addition to the premiums collected and is not subject to premium tax
743	743	or commissions. Failure to pay the surcharge by a policyholder
744	744	constitutes failure to pay premium for purposes of policy
745	745	cancellation.
746	746	SECTION 31. Subsections (c) and (d), Section 2210.351,
747	747	Insurance Code, are amended to read as follows:
748	748	(c) Except as provided by Subsection (d), as [As] soon as
749	749	reasonably possible after the filing has been made, the
750	750	commissioner in writing shall approve[, modify,] or disapprove the
751	751	filing. A filing is considered approved unless [modified or]
752	752	disapproved on or before the 30th day after the date of the filing.
753	753	If the commissioner disapproves a filing, the commissioner shall
754	754	state in writing the reasons for the disapproval and the criteria
755	755	the association is required to meet to obtain approval.
756	756	(d) The association may use a rate filed by the association
757	757	without prior commissioner approval if:
758	758	(1) the filing is made not later than the 30th day
759	759	before the date of any use or delivery for use of the rate;
760	760	(2) the filed rate does not exceed 105 percent of the
761	761	rate in effect on the date on which the filing is made;
762	762	(3) the filed rate does not reflect a rate change for
763	763	an individual rating class that is 10 percent higher than the rate
764	764	in effect for that rating class on the date on which the filing is
765	765	made; and
766	766	(4) the commissioner has not disapproved the filing in
767	767	writing, advising of the reasons for the disapproval and the
768	768	criteria the association is required to meet to obtain approval [If
769	769	at any time the commissioner determines that a filing approved
770	770	under Subsection (c) no longer meets the requirements of this
771	771	chapter, the commissioner may, after a hearing held on at least 20
772	772	days' notice to the association that specifies the matters to be
773	773	considered at the hearing, issue an order withdrawing approval of
774	774	the filing. The order must specify in what respects the
775	775	commissioner determines that the filing no longer meets the
776	776	requirements of this chapter. An order issued under this
777	777	subsection may not take effect before the 30th day after the date of
778	778	issuance of the order].
779	779	SECTION 32. Section 2210.352, Insurance Code, is amended to
780	780	read as follows:
781	781	Sec. 2210.352. MANUAL RATE FILINGS: ANNUAL FILING.
782	782	(a) Not later than August 15 of each year, the association shall
783	783	file with the department [for approval by the commissioner] a
784	784	proposed manual rate for all types and classes of risks written by
785	785	the association[. Chapter 40 does not apply to:
786	786	[(1) a filing made under this subsection; or
787	787	[(2) a department action with respect to the filing].
788	788	(a-1) The association may use a rate filed by the
789	789	association under this section without prior commissioner approval
790	790	if:
791	791	(1) the filing is made not later than the 30th day
792	792	before the date of any use or delivery for use of the rate;
793	793	(2) the filed rate does not exceed 105 percent of the
794	794	rate used by the association in effect on the date on which the
795	795	filing is made; and
796	796	(3) the filed rate does not reflect a rate change for
797	797	an individual rating class that is 10 percent higher than the rate
798	798	in effect for that rating class on the date on which the filing is
799	799	made.
800	800	(b) Except as provided by Subsection (a-1), before [Before]
801	801	approving or[,] disapproving[, or modifying] a filing under this
802	802	section, the commissioner shall provide all interested persons a
803	803	reasonable opportunity to:
804	804	(1) review the filing;
805	805	(2) obtain copies of the filing on payment of any
806	806	legally required copying cost; and
807	807	(3) submit to the commissioner written comments or
808	808	information related to the filing.
809	809	(c) Except as provided by Subsection (a-1), [The
810	810	commissioner shall schedule an open meeting not later than the 45th
811	811	day after the date the department receives a filing at which
812	812	interested persons may present written or oral comments relating to
813	813	the filing.
814	814	[(d) An open meeting under Subsection (c) is subject to
815	815	Chapter 551, Government Code, but is not a contested case hearing
816	816	under Chapter 2001, Government Code.
817	817	[(e) The department shall file with the secretary of state
818	818	for publication in the Texas Register notice that a filing has been
819	819	made under Subsection (a) not later than the seventh day after the
820	820	date the department receives the filing. The notice must include
821	821	information relating to:
822	822	[(1) the availability of the filing for public
823	823	inspection at the department during regular business hours and the
824	824	procedures for obtaining copies of the filing;
825	825	[(2) procedures for making written comments related to
826	826	the filing; and
827	827	[(3) the time, place, and date of the open meeting
828	828	scheduled under Subsection (c) at which interested persons may
829	829	present written or oral comments relating to the filing.
830	830	[(f) After the conclusion of the open meeting,] the
831	831	commissioner shall approve or[,] disapprove[, or modify] the filing
832	832	in writing not later than October [November] 15 of the year in which
833	833	the filing was made. If the filing is not approved or[,]
834	834	disapproved[, or modified] on or before that date, the filing is
835	835	considered approved.
836	836	(d) Except as provided by Subsection (a-1), if [(g) If] the
837	837	commissioner disapproves a filing, the commissioner shall state in
838	838	writing the reasons for the disapproval and the criteria the
839	839	association is required to meet to obtain approval.
840	840	SECTION 33. Section 2210.353, Insurance Code, is amended to
841	841	read as follows:
842	842	Sec. 2210.353. MANUAL RATE FILINGS: AMENDED ANNUAL FILING.
843	843	(a) Not later than the 30th day after the date the association
844	844	receives the commissioner's written disapproval under Section
845	845	2210.352(c) [2210.352(f)], the association may file with the
846	846	commissioner an amended annual filing that conforms to all criteria
847	847	stated in that written disapproval.
848	848	(b) Not later than the 30th day after the date an amended
849	849	filing made under Subsection (a) is received, the commissioner
850	850	shall approve [the amended filing with or without modifications] or
851	851	disapprove the amended filing. If the filing is not [modified or]
852	852	disapproved on or before the 30th day after the date of receipt, the
853	853	filing is considered approved [without modification]. If the
854	854	commissioner disapproves a filing, the commissioner shall state in
855	855	writing the reasons for the disapproval and the criteria the
856	856	association is required to meet to obtain approval.
857	857	(c) Before approving or disapproving an amended annual
858	858	filing under this section, the commissioner shall, in the manner
859	859	provided by Section 2210.352(b), provide all interested persons a
860	860	reasonable opportunity to:
861	861	(1) review the amended annual filing;
862	862	(2) obtain copies of the amended annual filing on
863	863	payment of any legally required copying cost; and
864	864	(3) submit to the commissioner written comments or
865	865	information related to the amended annual filing.
866	866	[(d) The commissioner may, in the manner provided by
867	867	Sections 2210.352(c) and (d), hold a hearing regarding an amended
868	868	filing not later than the 20th day after the date the department
869	869	receives the amended filing.
870	870	[(e) Not later than the 10th day after the date the hearing
871	871	is concluded, the commissioner shall approve or disapprove the
872	872	amended filing.
873	873	[(f) The requirements imposed under Subsection (a) and
874	874	under Sections 2210.352(e), (f), and (g) apply to a hearing
875	875	conducted under this section and the commissioner's decision
876	876	resulting from that hearing.]
877	877	SECTION 34. Subsections (a), (c), and (d), Section
878	878	2210.354, Insurance Code, are amended to read as follows:
879	879	(a) In conjunction with the review of a filing under Section
880	880	2210.352, other than a filing made under Subsection (a-1) of that
881	881	section [or 2210.353]:
882	882	(1) the commissioner may request the association to
883	883	provide additional supporting information relating to the filing;
884	884	and
885	885	(2) the office of public insurance counsel [any
886	886	interested person] may file a written request with the commissioner
887	887	for additional supporting information relating to the filing.
888	888	(c) The commissioner shall submit to the association all
889	889	requests for additional supporting information made under this
890	890	section for the commissioner's use not later than the 21st day after
891	891	the date of receipt of the filing [and the use of any interested
892	892	person].
893	893	(d) Unless a different period is requested by the
894	894	association and approved by the commissioner, the association shall
895	895	provide the information to the commissioner not later than the
896	896	fifth day after the date the written request for additional
897	897	supporting information is delivered to the association. [The
898	898	department shall notify an interested person who has requested
899	899	additional information of the availability of the information not
900	900	later than one business day after the date the commissioner
901	901	receives the information from the association.]
902	902	SECTION 35. Section 2210.355, Insurance Code, is amended by
903	903	amending Subsection (c) and adding Subsections (h) and (i) to read
904	904	as follows:
905	905	(c) Rates must be reasonable, adequate, not unfairly
906	906	discriminatory, and nonconfiscatory as to any class of insurer.
907	907	Rates must be sufficient to pay association operating expenses,
908	908	non-catastrophic claim loads, reinsurance, and other funding
909	909	requirements of the association as provided by this chapter.
910	910	(h) In adopting rates under this chapter, recognized
911	911	catastrophe models may be considered.
912	912	(i) The association may establish rating territories and
913	913	may vary rates among the territories as provided by this
914	914	subsection. A rating territory that subdivides a county may be used
915	915	only if the rate for any subdivision in the county is not more than
916	916	five percent higher than the rate used by the association in any
917	917	other subdivision in the county.
918	918	SECTION 36. Subsection (b), Section 2210.361, Insurance
919	919	Code, is amended to read as follows:
920	920	(b) After notice and hearing, the commissioner may accept[,
921	921	modify,] or reject a recommendation made by the association under
922	922	this section. [Chapter 40 does not apply to an action taken under
923	923	this section.]
924	924	SECTION 37. Subsections (a), (c), and (d), Section
925	925	2210.452, Insurance Code, are amended to read as follows:
926	926	(a) The commissioner shall adopt rules under which the
927	927	association makes [members relinquish their net equity on an annual
928	928	basis as provided by those rules by making] payments to the
929	929	catastrophe reserve trust fund. The trust fund may be used only to
930	930	fund[:
931	931	[(1)] the obligations of the trust fund under
932	932	Subchapter B-1 [Section 2210.058(a); and
933	933	[(2) the mitigation and preparedness plan established
934	934	under Section 2210.454 to reduce the potential for payments by
935	935	association members that give rise to tax credits in the event of
936	936	loss].
937	937	(c) At the end of each calendar year or policy year, the
938	938	association shall use [pay] the net gain from operations [equity]
939	939	of the association [a member], including all premium and other
940	940	revenue of the association in excess of incurred losses and
941	941	operating expenses, to make payments to the trust fund, to procure
942	942	[or a] reinsurance, or to make payments to the trust fund and to
943	943	procure reinsurance [program approved by the commissioner].
944	944	(d) The commissioner by rule shall establish the procedure
945	945	relating to the disbursement of money from the trust fund to
946	946	policyholders in the event of an occurrence or series of
947	947	occurrences within a catastrophe area that results in a
948	948	disbursement under Subchapter B-1 [Section 2210.058(a)].
949	949	SECTION 38. Section 2210.453, Insurance Code, is amended to
950	950	read as follows:
951	951	Sec. 2210.453. REINSURANCE [PROGRAM]. (a) The association
952	952	may [shall]:
953	953	(1) make payments into the trust fund; and [or]
954	954	(2) purchase [establish a] reinsurance [program
955	955	approved by the department].
956	956	(b) The [With the approval of the department, the]
957	957	association may purchase [establish a] reinsurance [program] that
958	958	operates in addition to or in concert with the trust fund, public
959	959	securities, assessments, and any financial instruments authorized
960	960	by this chapter.
961	961	SECTION 39. Subsection (b), Section 2210.454, Insurance
962	962	Code, is amended to read as follows:
963	963	(b) Each state fiscal year, the department may fund the
964	964	mitigation and preparedness plan using available funds [the
965	965	investment income of the trust fund in an amount not less than $1
966	966	million and not more than 10 percent of the investment income of the
967	967	prior fiscal year. From that amount and as part of that plan, the
968	968	department may use in each fiscal year $1 million for the windstorm
969	969	inspection program established under Section 2210.251].
970	970	SECTION 40. Section 2210.552, Insurance Code, is amended by
971	971	adding Subsection (e) to read as follows:
972	972	(e) Notwithstanding Subchapter H, Chapter 74, Government
973	973	Code, or any other law, an action brought under this section may not
974	974	be transferred by the judicial panel on multidistrict litigation.
975	975	SECTION 41. Chapter 2210, Insurance Code, is amended by
976	976	adding Subchapters M and N to read as follows:
977	977	SUBCHAPTER M. PUBLIC SECURITIES PROGRAM
978	978	Sec. 2210.601. PURPOSE. The legislature finds that
979	979	authorizing the issuance of public securities to provide a method
980	980	to raise funds to provide windstorm and hail insurance through the
981	981	association in certain designated portions of the state is for the
982	982	benefit of the public and in furtherance of a public purpose.
983	983	Sec. 2210.602. DEFINITIONS. In this subchapter:
984	984	(1) "Board" means the board of directors of the Texas
985	985	Public Finance Authority.
986	986	(2) "Class 1 public securities" means public
987	987	securities authorized to be issued before the occurrence of a
988	988	catastrophic event by Section 2210.072.
989	989	(3) "Class 2 public securities" means public
990	990	securities authorized to be issued on or after the occurrence of a
991	991	catastrophic event by Section 2210.073.
992	992	(4) "Credit agreement" has the meaning assigned by
993	993	Chapter 1371, Government Code.
994	994	(5) "Insurer" means each property and casualty insurer
995	995	authorized to engage in the business of property and casualty
996	996	insurance in this state and an affiliate of such an insurer, as
997	997	described by Section 823.003, including an affiliate that is not
998	998	authorized to engage in the business of property and casualty
999	999	insurance in this state. The term specifically includes a county
1000	1000	mutual insurance company, a Lloyd's plan, and a reciprocal or
1001	1001	interinsurance exchange.
1002	1002	(6) "Public security" means a debt instrument or other
1003	1003	public security issued by the Texas Public Finance Authority.
1004	1004	(7) "Public security administrative expenses" means
1005	1005	expenses incurred to administer public securities issued under this
1006	1006	subchapter, including fees for paying agents, trustees, and
1007	1007	attorneys, and for other professional services necessary to ensure
1008	1008	compliance with applicable state or federal law.
1009	1009	(8) "Public security obligations" means the principal
1010	1010	of a public security and any premium and interest on a public
1011	1011	security issued under this subchapter, together with any amount
1012	1012	owed under a related credit agreement.
1013	1013	(9) "Public security obligation revenue fund" means
1014	1014	the dedicated trust fund established by the association outside the
1015	1015	state treasury under this subchapter.
1016	1016	(10) "Public security resolution" means the
1017	1017	resolution or order authorizing public securities to be issued
1018	1018	under this subchapter.
1019	1019	Sec. 2210.603. APPLICABILITY OF OTHER LAWS. The board
1020	1020	shall issue the public securities as described by Section 2210.604
1021	1021	in accordance with and subject to the requirements of Chapter 1232,
1022	1022	Government Code, and other provisions of Title 9, Government Code,
1023	1023	that apply to issuance of a public security by a state agency. In
1024	1024	the event of a conflict, this subchapter controls.
1025	1025	Sec. 2210.604. ISSUANCE OF PUBLIC SECURITIES AUTHORIZED.
1026	1026	(a) At the request of the association and with the approval of the
1027	1027	commissioner, the Texas Public Finance Authority shall issue Class
1028	1028	1 or Class 2 public securities.
1029	1029	(b) The association shall specify in the association's
1030	1030	request to the board the maximum principal amount of the public
1031	1031	securities and the maximum term of the public securities.
1032	1032	(c) The principal amount determined by the association
1033	1033	under Subsection (b) may be increased to include an amount
1034	1034	sufficient to:
1035	1035	(1) pay the costs related to issuance of the public
1036	1036	securities;
1037	1037	(2) provide a public security reserve fund; and
1038	1038	(3) capitalize interest for the period determined
1039	1039	necessary by the association, not to exceed two years.
1040	1040	Sec. 2210.605. TERMS OF ISSUANCE. (a) The board shall
1041	1041	determine the method of sale, type and form of public security,
1042	1042	maximum interest rates, and other terms of the public securities
1043	1043	that, in the board's judgment, best achieve the goals of the
1044	1044	association and effect the borrowing at the lowest practicable
1045	1045	cost. The board may enter into a credit agreement in connection
1046	1046	with the public securities.
1047	1047	(b) Public securities must be issued in the name of the
1048	1048	association.
1049	1049	Sec. 2210.606. ADDITIONAL COVENANTS. The board may make
1050	1050	additional covenants with respect to the public securities and the
1051	1051	designated income and receipts of the association pledged to their
1052	1052	payment, and provide for the flow of funds and the establishment,
1053	1053	maintenance, and investment of funds and accounts with respect to
1054	1054	the public securities, and the administration of those funds and
1055	1055	accounts, as provided in the proceedings authorizing the public
1056	1056	securities.
1057	1057	Sec. 2210.607. PUBLIC SECURITY PROCEEDS. The proceeds of
1058	1058	public securities issued by the board under this subchapter may be
1059	1059	deposited with a trustee selected by the association in
1060	1060	consultation with the commissioner or held by the comptroller in a
1061	1061	dedicated trust fund outside the state treasury in the custody of
1062	1062	the comptroller.
1063	1063	Sec. 2210.608. USE OF PUBLIC SECURITY PROCEEDS.
1064	1064	(a) Public security proceeds, including investment income, shall
1065	1065	be held in trust for the exclusive use and benefit of the
1066	1066	association. The association may use the proceeds to:
1067	1067	(1) pay incurred claims and operating expenses of the
1068	1068	association;
1069	1069	(2) purchase reinsurance for the association;
1070	1070	(3) pay the costs of issuing the public securities,
1071	1071	and public security administrative expenses, if any;
1072	1072	(4) provide a public security reserve; and
1073	1073	(5) pay capitalized interest and principal on the
1074	1074	public securities for the period determined necessary by the
1075	1075	association.
1076	1076	(b) Any excess public security proceeds remaining after the
1077	1077	purposes for which the public securities were issued are satisfied
1078	1078	may be used to purchase or redeem outstanding public securities. If
1079	1079	there are no outstanding public security obligations or public
1080	1080	security administrative expenses, the excess proceeds shall be
1081	1081	transferred to the catastrophe reserve trust fund.
1082	1082	Sec. 2210.609. REPAYMENT OF ASSOCIATION'S PUBLIC SECURITY
1083	1083	OBLIGATIONS. (a) The association shall pay all public security
1084	1084	obligations from available funds collected by the association and
1085	1085	deposited into the public security obligation revenue fund. If the
1086	1086	association determines that it is unable to pay the public security
1087	1087	obligations and public security administrative expenses, if any,
1088	1088	with available funds, the association shall pay those obligations
1089	1089	and expenses in accordance with Sections 2210.612 and 2210.613, as
1090	1090	applicable.
1091	1091	(b) The board shall notify the association of the amount of
1092	1092	the public security obligations and the estimated amount of public
1093	1093	security administrative expenses, if any, each year in a period
1094	1094	sufficient, as determined by the association, to permit the
1095	1095	association to determine the availability of funds and assess a
1096	1096	premium surcharge if necessary.
1097	1097	(c) The association shall deposit all revenue collected
1098	1098	under Sections 2210.612 and 2210.613 in the public security
1099	1099	obligation revenue fund. Money deposited in the fund may be
1100	1100	invested as permitted by general law. Money in the fund required to
1101	1101	be used to pay public security obligations and public security
1102	1102	administrative expenses, if any, shall be transferred to the
1103	1103	appropriate funds in the manner and at the time specified in the
1104	1104	proceedings authorizing the public securities to ensure timely
1105	1105	payment of obligations and expenses.
1106	1106	(d) The association shall provide for the payment of the
1107	1107	public security obligations and the public security administrative
1108	1108	expenses by irrevocably pledging revenues received from premiums,
1109	1109	premium surcharges, and amounts on deposit in the public security
1110	1110	obligation revenue fund, together with any public security reserve
1111	1111	fund, as provided in the proceedings authorizing the public
1112	1112	securities and related credit agreements.
1113	1113	(e) An amount owed by the board under a credit agreement
1114	1114	shall be payable from and secured by a pledge of revenues received
1115	1115	by the association or amounts from the obligation trust fund to the
1116	1116	extent provided in the proceedings authorizing the credit
1117	1117	agreement.
1118	1118	Sec. 2210.610. PUBLIC SECURITY PAYMENTS. (a) Revenues
1119	1119	received from the premium surcharges under Section 2210.612 or
1120	1120	2210.613 may be applied only as provided by this subchapter.
1121	1121	(b) The association may pay public security obligations
1122	1122	with other legally available funds.
1123	1123	(c) Public security obligations are payable only from
1124	1124	sources provided for payment in this subchapter.
1125	1125	Sec. 2210.611. EXCESS REVENUE COLLECTIONS AND INVESTMENT
1126	1126	EARNINGS. Revenue collected in any year from a premium surcharge
1127	1127	under Section 2210.612 or 2210.613 that exceeds the amount of the
1128	1128	public security obligations and public security administrative
1129	1129	expenses payable in that year and interest earned on the public
1130	1130	security obligation fund may, in the discretion of the association,
1131	1131	be:
1132	1132	(1) used to pay public security obligations payable in
1133	1133	the subsequent year, offsetting the amount of the premium surcharge
1134	1134	that would otherwise be required to be levied for the year under
1135	1135	this subchapter;
1136	1136	(2) used to redeem or purchase outstanding public
1137	1137	securities; or
1138	1138	(3) deposited in the catastrophe reserve trust fund.
1139	1139	Sec. 2210.612. CLASS 1 PREMIUM SURCHARGE. (a) The
1140	1140	association shall pay interest on pre-event Class 1 public
1141	1141	securities issued under Section 2210.072 from its premium and other
1142	1142	revenue as provided by Section 2210.609.
1143	1143	(b) Notwithstanding Section 2210.609, to pay pre-event
1144	1144	principal and post-event principal and interest on the Class 1
1145	1145	public securities, each insurer and the association shall collect
1146	1146	from their policyholders a surcharge in addition to any premiums to
1147	1147	pay public security obligations and public security administrative
1148	1148	expenses, if any, on the Class 1 public securities. The association
1149	1149	shall determine the premium surcharge under this subsection at
1150	1150	least annually.
1151	1151	(c) On approval by the commissioner, each insurer and the
1152	1152	association shall assess a premium surcharge under Subsection (b)
1153	1153	to their policyholders who have a property or casualty insurance
1154	1154	policy or Texas windstorm and hail insurance policy that provides
1155	1155	coverage for premises, locations, operations, or property located
1156	1156	in a catastrophe area, first tier coastal county, or that part of a
1157	1157	second tier coastal county that is included in coverage through the
1158	1158	association and shall remit the premium surcharge to the
1159	1159	association as required by commissioner rule. A premium surcharge
1160	1160	under Subsection (b) shall apply to all policies that provide
1161	1161	coverage on any premises, locations, operations, or property
1162	1162	located in a catastrophe area, first tier coastal county, or that
1163	1163	part of a second tier coastal county that is included in coverage
1164	1164	through the association for all property and casualty lines of
1165	1165	insurance, other than federal flood insurance, workers'
1166	1166	compensation insurance, accident and health insurance, and medical
1167	1167	malpractice insurance.
1168	1168	(d) A premium surcharge under this section is a separate
1169	1169	nonrefundable charge in addition to the premiums collected and is
1170	1170	not subject to premium tax or commissions. Failure by a
1171	1171	policyholder to pay the surcharge constitutes failure to pay
1172	1172	premium for purposes of policy cancellation.
1173	1173	Sec. 2210.613. CLASS 2 PREMIUM SURCHARGE. (a) Each insurer
1174	1174	and the association shall collect from their policyholders a
1175	1175	premium surcharge to pay public security obligations and public
1176	1176	security administrative expenses, if any, on Class 2 public
1177	1177	securities issued under Section 2210.073. The premium surcharge
1178	1178	must be set in an amount sufficient to pay all debt service and all
1179	1179	related expenses on the public securities, as applicable.
1180	1180	(b) The association shall determine the premium surcharge
1181	1181	under Subsection (a) at least annually. On approval by the
1182	1182	commissioner, each insurer and the association shall assess the
1183	1183	premium surcharge under Subsection (a) to their policyholders who
1184	1184	have a property or casualty insurance policy or Texas windstorm and
1185	1185	hail insurance policy that provides coverage for premises,
1186	1186	locations, operations, or property located in a catastrophe area,
1187	1187	first tier coastal county, or that part of a second tier coastal
1188	1188	county that is included in coverage through the association and
1189	1189	shall remit the premium surcharge to the association as required by
1190	1190	commissioner rule. A premium surcharge under Subsection (a) shall
1191	1191	apply to all policies that provide coverage on any premises,
1192	1192	locations, operations, or property located in a catastrophe area,
1193	1193	first tier coastal county, or that part of a second tier coastal
1194	1194	county that is included in coverage through the association for all
1195	1195	property and casualty lines of insurance, other than federal flood
1196	1196	insurance, workers' compensation insurance, accident and health
1197	1197	insurance, and medical malpractice insurance.
1198	1198	(c) A premium surcharge under this section is a separate
1199	1199	nonrefundable charge in addition to the premiums collected and is
1200	1200	not subject to premium tax or commissions. Failure to pay the
1201	1201	surcharge by a policyholder constitutes failure to pay premium for
1202	1202	purposes of policy cancellation.
1203	1203	Sec. 2210.614. REFINANCING PUBLIC SECURITIES. The
1204	1204	association may request the board to refinance any public
1205	1205	securities issued in accordance with Subchapter B-1, whether Class
1206	1206	1 or Class 2 public securities, with the refinanced public
1207	1207	securities payable from the same sources as the original public
1208	1208	securities.
1209	1209	Sec. 2210.615. SOURCE OF PAYMENT; STATE DEBT NOT CREATED.
1210	1210	(a) A public security or credit agreement is payable solely from
1211	1211	revenue as provided by this subchapter.
1212	1212	(b) A public security issued under this subchapter, and any
1213	1213	related credit agreement, is not a debt of this state or any state
1214	1214	agency or political subdivision of this state, and does not
1215	1215	constitute a pledge of the faith and credit of this state or any
1216	1216	state agency or political subdivision of this state.
1217	1217	(c) Each public security, and any related credit agreement,
1218	1218	issued under this subchapter must state on the security's face
1219	1219	that:
1220	1220	(1) neither the state nor a state agency, political
1221	1221	corporation, or political subdivision of the state is obligated to
1222	1222	pay the principal of or interest on the public security except as
1223	1223	provided by this subchapter; and
1224	1224	(2) neither the faith and credit nor the taxing power
1225	1225	of the state or any state agency, political corporation, or
1226	1226	political subdivision of the state is pledged to the payment of the
1227	1227	principal of or interest on the public security.
1228	1228	Sec. 2210.616. STATE NOT TO IMPAIR PUBLIC SECURITY
1229	1229	OBLIGATIONS. If public securities under this subchapter are
1230	1230	outstanding, the state may not:
1231	1231	(1) take action to limit or restrict the rights of the
1232	1232	association to fulfill its responsibility to pay public security
1233	1233	obligations; or
1234	1234	(2) in any way impair the rights and remedies of the
1235	1235	public security owners until the public securities are fully
1236	1236	discharged.
1237	1237	Sec. 2210.617. ENFORCEMENT BY MANDAMUS. A writ of mandamus
1238	1238	and any other legal and equitable remedies are available to a party
1239	1239	at interest to require the association or another party to fulfill
1240	1240	an agreement and to perform functions and duties under:
1241	1241	(1) this subchapter;
1242	1242	(2) the Texas Constitution; or
1243	1243	(3) a relevant public security resolution.
1244	1244	Sec. 2210.618. EXEMPTION FROM TAXATION. A public security
1245	1245	issued under this subchapter, any transaction relating to the
1246	1246	public security, and profits made from the sale of the public
1247	1247	security are exempt from taxation by this state or by a municipality
1248	1248	or other political subdivision of this state.
1249	1249	Sec. 2210.619. NO PERSONAL LIABILITY. The members of the
1250	1250	association, members of the association board of directors,
1251	1251	association employees, the board, the employees of the Texas Public
1252	1252	Finance Authority, the commissioner, and department employees are
1253	1253	not personally liable as a result of exercising the rights and
1254	1254	responsibilities granted under this subchapter.
1255	1255	Sec. 2210.620. AUTHORIZED INVESTMENTS. Public securities
1256	1256	issued under this subchapter are authorized investments under:
1257	1257	(1) Subchapter B, Chapter 424;
1258	1258	(2) Subchapter C, Chapter 425; and
1259	1259	(3) Sections 425.203-425.213.
1260	1260	SUBCHAPTER N. LEGISLATIVE OVERSIGHT BOARD
1261	1261	Sec. 2210.651. DEFINITION. In this subchapter, "board"
1262	1262	means the windstorm insurance legislative oversight board.
1263	1263	Sec. 2210.652. COMPOSITION OF BOARD. The windstorm
1264	1264	insurance legislative oversight board is composed of six members as
1265	1265	follows:
1266	1266	(1) three members of the senate appointed by the
1267	1267	lieutenant governor, at least one of whom does not represent a
1268	1268	district in the seacoast territory; and
1269	1269	(2) three members of the house of representatives
1270	1270	appointed by the speaker of the house of representatives, at least
1271	1271	one of whom does not represent a district in the seacoast territory.
1272	1272	Sec. 2210.653. POWERS AND DUTIES OF BOARD. (a) The board
1273	1273	shall:
1274	1274	(1) receive information about rules proposed by the
1275	1275	department relating to windstorm insurance and may submit comments
1276	1276	to the commissioner on the proposed rules;
1277	1277	(2) monitor windstorm insurance in this state,
1278	1278	including:
1279	1279	(A) the fairness of rates;
1280	1280	(B) the operation of the association; and
1281	1281	(C) the availability of coverage; and
1282	1282	(3) review recommendations for legislation proposed
1283	1283	by the department or the association.
1284	1284	(b) The board may request reports and other information from
1285	1285	the department and the association as necessary to implement this
1286	1286	subchapter.
1287	1287	Sec. 2210.654. REPORT. (a) Not later than November 15 of
1288	1288	each even-numbered year, the board shall report on the board's
1289	1289	activities under Section 2210.653 to:
1290	1290	(1) the governor;
1291	1291	(2) the lieutenant governor; and
1292	1292	(3) the speaker of the house of representatives.
1293	1293	(b) The report must include:
1294	1294	(1) an analysis of any problems identified; and
1295	1295	(2) recommendations for any legislative action
1296	1296	necessary to address those problems and to foster stability,
1297	1297	availability, and competition within the windstorm insurance
1298	1298	industry.
1299	1299	SECTION 42. Section 941.003, Insurance Code, is amended by
1300	1300	adding Subsection (e) to read as follows:
1301	1301	(e) A Lloyd's plan is subject to Chapter 2210, as provided
1302	1302	by that chapter.
1303	1303	SECTION 43. Section 942.003, Insurance Code, is amended by
1304	1304	adding Subsection (f) to read as follows:
1305	1305	(f) An exchange is subject to Chapter 2210, as provided by
1306	1306	that chapter.
1307	1307	SECTION 44. The following laws are repealed:
1308	1308	(1) Subdivisions (5) and (12), Section 2210.003,
1309	1309	Insurance Code;
1310	1310	(2) Sections 2210.058 and 2210.059, Insurance Code;
1311	1311	(3) Sections 2210.205 and 2210.206, Insurance Code;
1312	1312	(4) Sections 2210.256 and 2210.257, Insurance Code;
1313	1313	(5) Sections 2210.356, 2210.360, and 2210.363,
1314	1314	Insurance Code; and
1315	1315	(6) Subchapter G, Chapter 2210, Insurance Code.
1316	1316	SECTION 45. (a) The board of directors of the Texas
1317	1317	Windstorm Insurance Association established under Section
1318	1318	2210.102, Insurance Code, as that section existed before amendment
1319	1319	by this Act, is abolished effective December 31, 2009.
1320	1320	(b) The commissioner of insurance shall appoint the members
1321	1321	of the board of directors of the Texas Windstorm Insurance
1322	1322	Association under Section 2210.102, Insurance Code, as amended by
1323	1323	this Act, not later than December 31, 2009.
1324	1324	(c) The term of a person who is serving as a member of the
1325	1325	board of directors of the Texas Windstorm Insurance Association
1326	1326	immediately before the abolition of that board under Subsection (a)
1327	1327	of this section expires on December 31, 2009. Such a person is
1328	1328	eligible for appointment by the commissioner of insurance to the
1329	1329	new board of directors of the Texas Windstorm Insurance Association
1330	1330	under Section 2210.102, Insurance Code, as amended by this Act.
1331	1331	SECTION 46. (a) The commissioner of insurance shall adopt
1332	1332	rules as required by Chapter 2210, Insurance Code, as amended by
1333	1333	this Act, as soon as possible after the effective date of this Act,
1334	1334	but not later than the 30th day after the effective date of this
1335	1335	Act.
1336	1336	(b) The Texas Windstorm Insurance Association, through the
1337	1337	board of directors of that association, shall propose to the
1338	1338	commissioner of insurance amendments to the association's plan of
1339	1339	operation as required by Chapter 2210, Insurance Code, as amended
1340	1340	by this Act, not later than March 1, 2010.
1341	1341	SECTION 47. Sections 2210.202 and 2210.203, Insurance Code,
1342	1342	as amended by this Act, apply to an application for insurance
1343	1343	coverage submitted to the Texas Windstorm Insurance Association on
1344	1344	or after the effective date of this Act.
1345	1345	SECTION 48. Section 2210.251, Insurance Code, as amended by
1346	1346	this Act, applies to an inspection conducted by the Texas Windstorm
1347	1347	Insurance Association on or after September 1, 2009. Except as
1348	1348	otherwise specifically provided by that section, a structure that
1349	1349	has been inspected and is the subject of a certificate of compliance
1350	1350	issued by the Texas Department of Insurance under Subsection (g),
1351	1351	Section 2210.251, Insurance Code, as that section existed
1352	1352	immediately before September 1, 2009, is not required to obtain an
1353	1353	inspection certificate from the Texas Windstorm Insurance
1354	1354	Association to remain eligible for insurance coverage through that
1355	1355	association unless the structure is remodeled, enlarged, or
1356	1356	repaired on or after September 1, 2009.
1357	1357	SECTION 49. The changes in law made by this Act in amending
1358	1358	Sections 2210.251, 2210.254, and 2210.255, Insurance Code, adding
1359	1359	Section 2210.2565, Insurance Code, and repealing Section 2210.256,
1360	1360	Insurance Code, take effect September 1, 2009.
1361	1361	SECTION 50. Section 2210.552, Insurance Code, as amended by
1362	1362	this Act, applies to a cause of action that accrues on or after the
1363	1363	effective date of this Act. A cause of action that accrues before
1364	1364	the effective date of this Act is governed by the law as it exists
1365	1365	immediately before that date, and that law is continued in effect
1366	1366	for that purpose.
1367	1367	SECTION 51. The state auditor shall conduct the initial
1368	1368	audit of the association, as required under Section 2210.010,
1369	1369	Insurance Code, as added by this Act, not later than the fourth
1370	1370	anniversary of the effective date of this Act.
1371	1371	SECTION 52. Except as otherwise provided by this Act, this
1372	1372	Act takes effect immediately if it receives a vote of two-thirds of
1373	1373	all the members elected to each house, as provided by Section 39,
1374	1374	Article III, Texas Constitution. If this Act does not receive the
1375	1375	vote necessary for immediate effect, this Act takes effect
1376	1376	September 1, 2009.