81R35396 PB-D
By: Fraser S.B. No. 14
Substitute the following for S.B. No. 14:
By: Smithee C.S.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; making an
appropriation.
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 Subdivisions (3-a) and (3-b) and amending Subdivision (6) to
read as follows:
(3-a) "Catastrophe reserve trust fund" means the trust
fund established under Subchapter J.
(3-b) "Financial instruments" means insurance and
other financial devices, as approved by the commissioner, that may
be used to provide funding for payment of excess losses of the
association.
(6) "Insurance" means Texas [fire and explosion
insurance and Texas] windstorm and hail insurance.
SECTION 5. Subsection (a), Section 2210.004, Insurance
Code, is 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.
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) 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) 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.
(c) The commissioner may adopt rules in the manner
prescribed by Subchapter A, Chapter 36, as reasonable and necessary
to implement this chapter.
SECTION 8. Subchapter A, Chapter 2210, Insurance Code, is
amended by adding Sections 2210.009 and 2210.010 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.
Sec. 2210.010. AUDIT. The state auditor shall conduct an
audit of the association at least once every four years.
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. Subsection (b), Section 2210.056, 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 and public securities, and any 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. Subsection (c), Section 2210.060, 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. PAYMENT OF EXCESS LOSSES; PAYMENT FROM
RESERVES AND TRUST FUND. (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.
(c) Losses in excess of the available reserves of the
association shall be paid from available amounts in the catastrophe
reserve trust fund.
Sec. 2210.072. PAYMENT FROM CLASS 1 PUBLIC SECURITIES. (a)
Losses not paid under Section 2210.071 shall be paid as provided by
this section from the 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.
(b) Public securities described by Subsection (a) 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, may be insufficient to pay insured
losses. The public securities shall be issued as necessary in a
principal amount not to exceed $300 million per occurrence.
(c) Any public securities proceeds received under this
section from Class 1 public securities authorized in accordance
with Subchapter M before the date of any occurrence that results in
insured losses under Subsection (a):
(1) must be used before the proceeds of any public
securities that the association authorizes to be issued under
Section 2210.073 on or after any catastrophic event; and
(2) may not be used to fund losses of any catastrophic
event occurring before the date public securities described by this
section are authorized to be issued.
(d) If the losses are paid with public securities described
by this section, the public securities shall be repaid as
prescribed by Subchapter M.
Sec. 2210.073. PAYMENT FROM CLASS 2 PUBLIC SECURITIES. (a)
Losses not paid under Sections 2210.071 and 2210.072 shall be paid
as provided by this section from 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 this subsection.
(b) Public securities described by Subsection (a) may be
issued as necessary in a principal amount not to exceed $300 million
per occurrence.
(c) If the losses are paid with public securities described
by this section, the public securities shall be repaid as
prescribed by Subchapter M.
Sec. 2210.074. PAYMENT THROUGH NONRECOUPABLE MEMBER
ASSESSMENTS. (a) Losses not paid under Sections 2210.071,
2210.072, and 2210.073 shall be paid through member assessments as
provided by this section. The association shall assess the members
of the association an amount not to exceed $300 million per
occurrence for the payment of the losses. The association shall
notify each member of the association of the amount of the member's
assessment under this section.
(b) 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) A member of the association may not recoup an assessment
paid under this section through a premium surcharge or tax credit.
Sec. 2210.075. PAYMENT THROUGH RECOUPABLE MEMBER
ASSESSMENTS. (a) Losses not paid under Sections 2210.071-2210.074
shall be paid through member assessments as provided by this
section. The association shall assess the members of the
association an amount not to exceed $100 million per occurrence for
the payment of the losses. The association shall notify each member
of the association of the amount of the member's assessment under
this section.
(b) 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 assessments shall be repaid by a nonrefundable
premium surcharge collected under this section in an amount set by
the commissioner. The association and each insurer shall collect
from each of its policyholders who reside in or have operations in,
or whose insured property is located in, a catastrophe area, the
nonrefundable premium surcharge for each Texas windstorm and hail
insurance policy and each property and casualty insurance policy
issued by the insurer for property located in the catastrophe area.
(d) A premium surcharge under this section applies 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.
(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 by a
policyholder to pay the surcharge constitutes failure to pay
premium for purposes of policy cancellation.
Sec. 2210.076. PAYMENT THROUGH REINSURANCE. (a) Losses
not paid under Sections 2210.071-2210.075 shall be paid through
reinsurance as provided by this section.
(b) The association shall purchase reinsurance in an amount
not to exceed $1 billion. The cost of the reinsurance purchased
under this section shall be paid from premium paid by the
policyholders of the association and other revenue of the
association.
Sec. 2210.077. PAYMENT FROM ADDITIONAL ASSOCIATION
ASSESSMENTS. (a) Losses not paid under Sections 2210.071-2210.076
shall be paid through member assessments as provided by this
section.
(b) The association shall assess the members of the
association an amount not to exceed $750 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 assessments under this section, 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.
(d) A member of the association may credit an amount paid in
accordance with this section in a calendar year against the
insurer's premium tax under Chapter 221. The tax credit authorized
under this subsection shall be allowed at a rate not to exceed 20
percent per year for five or more successive years beginning the
calendar year that the assessments under this section are paid. The
balance of payments made by the insurer and not claimed as a premium
tax credit may be reflected in the books and records of the insurer
as an admitted asset of the insurer for all purposes, including
exhibition in an annual statement under Section 862.001.
Sec. 2210.078. NOTIFICATION REGARDING TAX CREDITS. (a)
The association shall immediately notify the department if an
occurrence or series of occurrences in a catastrophe area results
in insured losses that result in a tax credit under Section
2210.077(d) in a calendar year.
(b) On receipt of notice under Subsection (a), the
department shall immediately notify the governor and the
appropriate committees of each house of the legislature of the
amount of insured losses eligible for tax credits under Section
2210.077(d).
Sec. 2210.079. COMBINATION OF FINANCING MECHANISMS.
Notwithstanding any other provision of this subchapter, if the
board of directors determines that the sale of public securities or
the purchase of reinsurance is not possible, or that other
financing mechanisms described by this subchapter are fiscally
appropriate or economically beneficial to this state, the board of
directors, with the approval of the commissioner, may use any
combination of the financing arrangements described by this
subchapter as necessary to pay the excess losses.
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
the insurance industry.
(c) Four members must [different insurers who are members of
the association, elected by the members as provided by the plan of
operation;
[(2) two public representatives who are nominated by
the office of public insurance counsel and who], as of the date of
the appointment, [:
[(A)] reside in the first tier coastal counties. At
least one of the members appointed under this subsection must be a
[catastrophe area; and
[(B) are policyholders of the association; and
[(3) two] property and casualty agent who is licensed
under this code and is not a captive agent.
(d) One member must be a representative of an area of this
state that is not located in the seacoast territory with
demonstrated expertise in insurance and actuarial principles.
(e) All members must [agents, 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) Insurers who are members of the association shall
nominate, from among those members, persons to fill any vacancy in
the four board of director seats reserved for representatives of
the insurance industry. The board of directors shall solicit
nominations from the members and submit the nominations to the
commissioner. The nominee slate submitted to the commissioner
under this subsection must include at least three more names than
the number of vacancies. The commissioner shall appoint
replacement insurance industry representatives from the nominee
slate.
(g) 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.
(h) [(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 for misconduct, refusal to serve, or other failure to
comply with this chapter or rules adopted under this chapter. The
cause of the removal must be stated in writing and posted on the
association's website. 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. Section 2210.105, Insurance Code, is amended by
adding Subsection (d) to read as follows:
(d) Except for an emergency meeting, a meeting of the board
of directors shall be held at a location as determined by the board
of directors.
SECTION 18. 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, which shall be located in a
tier one county; a recording of these meetings shall be posted on
the association's website;
(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 19. 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 20. 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 21. Subsection (a), Section 2210.152, 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 under any financial instruments authorized under this
chapter;
(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 22. 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 one declination from an insurer
authorized to engage in the business of, and writing, property
insurance providing windstorm and hail coverage 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 for the perils of windstorm and hail and
the inability to obtain substantially equivalent insurance
coverage for the perils of windstorm and hail. Notwithstanding
Section 2210.203(c), evidence of one declination 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. Each application for initial or renewal
coverage must also contain a statement that the agent possesses
proof of the declination described by Subsection (a) and proof of
flood insurance coverage or unavailability of that coverage as
described by Section 2210.203(a-1).
SECTION 23. Section 2210.203, Insurance Code, is amended by
adding Subsection (a-1) to read as follows:
(a-1) This subsection applies only to a structure
constructed, remodeled, or enlarged on or after the effective date
of S.B. No. 14, Acts of the 81st Legislature, Regular Session, 2009,
and only for insurable property located in areas designated by the
commissioner. Notwithstanding Subsection (a), if all or any part
of the property to which this subsection applies 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 an insurance policy for initial coverage
unless evidence that the property is covered by a flood insurance
policy is submitted to the association. An agent offering or
selling a Texas windstorm and hail insurance policy in any area
designated by the commissioner under this subsection shall offer
flood insurance coverage to the prospective insured, if that
coverage is available.
SECTION 24. Section 2210.204, Insurance Code, is amended by
amending Subsection (d) and adding Subsection (e) to read as
follows:
(d) If an insured requests cancellation of the insurance
coverage, the association shall refund the unearned premium, less
any minimum retained premium set forth in the plan of operation,
payable to the insured and the holder of an unpaid balance. The
property and casualty agent who submitted the application shall
refund the agent's commission on any unearned premium in the same
manner.
(e) For cancellation of insurance coverage under this
section, the minimum retained premium in the plan of operation must
be for a period of not less than 180 days, except for events
specified in the plan of operation that reflect a significant
change in the exposure or the policyholder concerning the insured
property, including:
(1) the purchase of similar coverage in the voluntary
market;
(2) sale of the property to an unrelated party;
(3) death of the policyholder; or
(4) total loss of the property.
SECTION 25. Subchapter E, Chapter 2210, Insurance Code, is
amended by adding Section 2210.2041 to read as follows:
Sec. 2210.2041. NONREFUNDABLE SURCHARGE. A nonrefundable
surcharge established under this chapter is not refundable under
this code for any reason or purpose.
SECTION 26. 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, remodeled, enlarged,
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, remodeled, enlarged, 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, remodeling, enlargement, 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, remodeled, enlarged, 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 must reflect coverage for the perils of
windstorm and hail for the property within the 12-month period
immediately preceding the date of the application for coverage
through the association and 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) Notwithstanding any other provision of this section, a
residential structure insured by the association as of June 1,
2009, may continue coverage through the association subject to the
inspection requirements imposed under Section 2210.258.
(g) 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.
(i) The association shall charge a reasonable fee for each
inspection of each structure in an amount set by the board of
directors. The association may use fees collected under
this section for operating expenses or for the purchase of
reinsurance.
(j) Without limitation of the department's authority to
otherwise enforce this chapter, the department shall monitor the
association's compliance with this subchapter.
(k) Except as otherwise provided by this subchapter, the
association may not consider any request that a structure be
certified as insurable property if, within six months after the
final inspection of a structure, the association has not received:
(1) fully completed documentation verifying that the
structure has been constructed, remodeled, enlarged, or repaired,
or any addition to the structure has been made, in compliance with
the plan of operation; and
(2) full payment of all inspection fees owed to the
association, including any fees related to prior association
inspections.
(l) If a structure is rejected for coverage under Subsection
(k), a person may make a new request for certification and the
structure may be reinspected for compliance with the plan of
operation. A request for certification brought under this
subsection must meet the requirements of Subsection (k).
SECTION 27. Subsections (a), (c), and (d), Section
2210.254, 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 28. 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 29. 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 30. Subchapter F, Chapter 2210, Insurance Code, is
amended by adding Sections 2210.258 and 2210.259 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, remodeling, enlargement, and repair of, or addition
to, any structure located in the catastrophe area that is begun on
or after the effective date of S.B. No. 14, Acts of the 81st
Legislature, Regular Session, 2009, 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(g).
Sec. 2210.259. SURCHARGE FOR CERTAIN NONCOMPLIANT
STRUCTURES. (a) A noncompliant residential structure insured by
the association as of June 1, 2009, under Section 2210.251(f) that
had been approved for insurability under the approval process
regulations in effect on June 1, 2009, is subject to an annual
premium surcharge in an amount equal to 15 percent of the premium
for insurance coverage obtained through the association. The
surcharge under this subsection applies to each policy issued or
renewed by the association on or after the effective date of S.B.
No. 14, Acts of the 81st Legislature, Regular Session, 2009, and is
due on the issuance or renewal of the policy.
(b) 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.
SECTION 31. Subsections (c) and (d), Section 2210.351,
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 in effect on the date on which the filing is made;
(3) the filed rate does not reflect a rate change for
an individual rating class that is 10 percent higher than the rate
in effect for that rating class on the date on which the filing is
made; 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 32. Section 2210.352, Insurance Code, is amended to
read as follows:
Sec. 2210.352. MANUAL RATE FILINGS: ANNUAL FILING.
(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 in effect on the date on which the
filing is made; and
(3) the filed rate does not reflect a rate change for
an individual rating class that is 10 percent higher than the rate
in effect for that rating class on the date on which the filing is
made.
(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
commissioner shall schedule an open meeting not later than the 45th
day after the date the department receives a filing at which
interested persons may present written or oral comments relating to
the filing.
[(d) An open meeting under Subsection (c) is subject to
Chapter 551, Government Code, but is not a contested case hearing
under Chapter 2001, Government Code.
[(e) 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 October [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.
(d) Except as provided by Subsection (a-1), if [(g) 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.
SECTION 33. 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(c) [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 34. Subsections (a), (c), and (d), Section
2210.354, Insurance Code, are amended to read as follows:
(a) In conjunction with the review of a filing under Section
2210.352, other than a filing made under Subsection (a-1) of that
section [or 2210.353]:
(1) the commissioner may request the association to
provide additional supporting information relating to the filing;
and
(2) the office of public insurance counsel [any
interested person] may file a written request with the commissioner
for additional supporting information relating to the filing.
(c) The commissioner shall submit to the association all
requests for additional supporting information made under this
section for the commissioner's use not later than the 21st day after
the date of receipt of the filing [and the use of any interested
person].
(d) Unless a different period is requested by the
association and approved by the commissioner, the association shall
provide the information to the commissioner not later than the
fifth day after the date the written request for additional
supporting information is delivered to the association. [The
department shall notify an interested person who has requested
additional information of the availability of the information not
later than one business day after the date the commissioner
receives the information from the association.]
SECTION 35. Section 2210.355, Insurance Code, is amended by
amending Subsection (c) and adding Subsections (h) and (i) to read
as follows:
(c) Rates must be reasonable, adequate, not unfairly
discriminatory, and nonconfiscatory as to any class of insurer.
Rates must be sufficient to pay association operating expenses,
non-catastrophic claim loads, reinsurance, and other funding
requirements of the association as provided by this chapter.
(h) In adopting rates under this chapter, recognized
catastrophe models may be considered.
(i) The association may establish rating territories and
may vary rates among the territories as provided by this
subsection. A rating territory that subdivides a county may be used
only if the rate for any subdivision in the county is not more than
five percent higher than the rate used by the association in any
other subdivision in the county.
SECTION 36. Subsection (b), Section 2210.361, Insurance
Code, is amended to read as follows:
(b) After notice and hearing, the commissioner may accept[,
modify,] or reject a recommendation made by the association under
this section. [Chapter 40 does not apply to an action taken under
this section.]
SECTION 37. Subsections (a), (c), and (d), Section
2210.452, 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 38. 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, assessments, and any financial instruments authorized
by this chapter.
SECTION 39. Subsection (b), Section 2210.454, 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 40. Section 2210.552, Insurance Code, is amended by
adding Subsection (e) to read as follows:
(e) Notwithstanding Subchapter H, Chapter 74, Government
Code, or any other law, an action brought under this section may not
be transferred by the judicial panel on multidistrict litigation.
SECTION 41. Chapter 2210, Insurance Code, is amended by
adding Subchapters M and N 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 2210.072.
(3) "Class 2 public securities" means public
securities authorized to be issued on or after the occurrence of a
catastrophic event by Section 2210.073.
(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. (a) The
association shall pay interest on pre-event Class 1 public
securities issued under Section 2210.072 from its premium and other
revenue as provided by Section 2210.609.
(b) Notwithstanding Section 2210.609, to pay pre-event
principal and post-event principal and interest on the Class 1
public securities, each insurer and the association shall collect
from their policyholders a surcharge in addition to any premiums to
pay public security obligations and public security administrative
expenses, if any, on the Class 1 public securities. The association
shall determine the premium surcharge under this subsection at
least annually.
(c) On approval by the commissioner, each insurer and the
association shall assess a premium surcharge under Subsection (b)
to their policyholders who have a property or casualty insurance
policy or Texas windstorm and hail insurance policy that provides
coverage for premises, locations, operations, or property located
in a catastrophe area, first tier coastal county, or that part of a
second tier coastal county that is included in coverage through the
association and shall remit the premium surcharge to the
association as required by commissioner rule. A premium surcharge
under Subsection (b) shall apply to all policies that provide
coverage on any premises, locations, operations, or property
located in a catastrophe area, first tier coastal county, or that
part of a second tier coastal county that is included in coverage
through the association for all property and casualty lines of
insurance, other than federal flood insurance, workers'
compensation insurance, accident and health insurance, and medical
malpractice insurance.
(d) 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.
Sec. 2210.613. CLASS 2 PREMIUM SURCHARGE. (a) Each insurer
and the association shall collect from their policyholders a
premium surcharge to pay public security obligations and public
security administrative expenses, if any, on Class 2 public
securities issued under Section 2210.073. The premium surcharge
must be set in an amount sufficient to pay all debt service and all
related expenses on the public securities, as applicable.
(b) The association shall determine the premium surcharge
under Subsection (a) at least annually. On approval by the
commissioner, each insurer and the association shall assess the
premium surcharge under Subsection (a) to their policyholders who
have a property or casualty insurance policy or Texas windstorm and
hail insurance policy that provides coverage for premises,
locations, operations, or property located in a catastrophe area,
first tier coastal county, or that part of a second tier coastal
county that is included in coverage through the association and
shall remit the premium surcharge to the association as required by
commissioner rule. A premium surcharge under Subsection (a) shall
apply to all policies that provide coverage on any premises,
locations, operations, or property located in a catastrophe area,
first tier coastal county, or that part of a second tier coastal
county that is included in coverage through the association for all
property and casualty lines of insurance, other than federal flood
insurance, workers' compensation insurance, accident and health
insurance, and medical malpractice insurance.
(c) 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.
SUBCHAPTER N. LEGISLATIVE OVERSIGHT BOARD
Sec. 2210.651. DEFINITION. In this subchapter, "board"
means the windstorm insurance legislative oversight board.
Sec. 2210.652. COMPOSITION OF BOARD. The windstorm
insurance legislative oversight board is composed of six members as
follows:
(1) three members of the senate appointed by the
lieutenant governor, at least one of whom does not represent a
district in the seacoast territory; and
(2) three members of the house of representatives
appointed by the speaker of the house of representatives, at least
one of whom does not represent a district in the seacoast territory.
Sec. 2210.653. POWERS AND DUTIES OF BOARD. (a) The board
shall:
(1) receive information about rules proposed by the
department relating to windstorm insurance and may submit comments
to the commissioner on the proposed rules;
(2) monitor windstorm insurance in this state,
including:
(A) the fairness of rates;
(B) the operation of the association; and
(C) the availability of coverage; and
(3) review recommendations for legislation proposed
by the department or the association.
(b) The board may request reports and other information from
the department and the association as necessary to implement this
subchapter.
Sec. 2210.654. REPORT. (a) Not later than November 15 of
each even-numbered year, the board shall report on the board's
activities under Section 2210.653 to:
(1) the governor;
(2) the lieutenant governor; and
(3) the speaker of the house of representatives.
(b) The report must include:
(1) an analysis of any problems identified; and
(2) recommendations for any legislative action
necessary to address those problems and to foster stability,
availability, and competition within the windstorm insurance
industry.
SECTION 42. 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 43. 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 44. The following laws are repealed:
(1) Subdivisions (5) and (12), Section 2210.003,
Insurance Code;
(2) Sections 2210.058 and 2210.059, Insurance Code;
(3) Sections 2210.205 and 2210.206, Insurance Code;
(4) Sections 2210.256 and 2210.257, Insurance Code;
(5) Sections 2210.356, 2210.360, and 2210.363,
Insurance Code; and
(6) Subchapter G, Chapter 2210, Insurance Code.
SECTION 45. (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 46. (a) The commissioner of insurance shall adopt
rules as required by Chapter 2210, Insurance Code, as amended by
this Act, as soon as possible after the effective date of this Act,
but not later than the 30th 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 47. Sections 2210.202 and 2210.203, Insurance Code,
as amended by this Act, apply to an application for insurance
coverage submitted to the Texas Windstorm Insurance Association on
or after the effective date of this Act.
SECTION 48. 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 Subsection (g),
Section 2210.251, 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 remodeled, enlarged, or
repaired on or after September 1, 2009.
SECTION 49. 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 50. Section 2210.552, Insurance Code, as amended by
this Act, applies to a cause of action that accrues on or after the
effective date of this Act. A cause of action that accrues before
the effective date of this Act is governed by the law as it exists
immediately before that date, and that law is continued in effect
for that purpose.
SECTION 51. The state auditor shall conduct the initial
audit of the association, as required under Section 2210.010,
Insurance Code, as added by this Act, not later than the fourth
anniversary of the effective date of this Act.
SECTION 52. 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.