Texas 2009 - 81st Regular

Texas Senate Bill SB149 Compare Versions

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

Old	New	Differences
1	1	81R2183 AJA-F
2	2	By: Ellis S.B. No. 149
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to the availability of property insurance under the Fair
8	8	Access to Insurance Requirements (FAIR) Plan.
9	9	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	10	SECTION 1. Section 2211.001, Insurance Code, is amended by
11	11	amending Subdivisions (6), (7), and (8) and adding Subdivisions
12	12	(1-b), (6-a), (6-b), and (7-a) to read as follows:
13	13	(1-b) "Commercial property insurance" means coverage
14	14	provided in a commercial fire and allied lines insurance policy
15	15	against loss incurred to real or tangible business personal
16	16	property, including loss of business income due to direct physical
17	17	loss of or damage to property at the covered premises. The term
18	18	includes farm and ranch insurance and farm and ranch owners
19	19	insurance.
20	20	(6) "Net direct premiums" means gross direct written
21	21	premiums less return premiums on canceled contracts, regardless of
22	22	reinsurance assumed or ceded, written on residential and commercial
23	23	property under this chapter.
24	24	(6-a) "Participating insurer" includes an insurer
25	25	writing property insurance.
26	26	(6-b) "Property insurance," except as otherwise
27	27	provided by this chapter, includes both commercial property
28	28	insurance and residential property insurance.
29	29	(7) "Residential property insurance" means the
30	30	coverage provided by a homeowners insurance policy or [,]
31	31	residential fire and allied lines insurance policy[, or farm and
32	32	ranch owners insurance policy] against loss incurred to real or
33	33	tangible personal property at a fixed location.
34	34	(7-a) "Supplementary rating information" means any
35	35	manual, rating schedule, plan of rules, rating rules,
36	36	classification systems, territory codes and descriptions, rating
37	37	plans, and other similar information used by the association to
38	38	determine the applicable premium for an insured. The term includes
39	39	factors and relativities, including increased limits factors,
40	40	classification relativities, deductible relativities, premium
41	41	discount, and other similar factors and rating plans.
42	42	(8) "Underserved area" or "underserved areas" means an
43	43	area or areas designated as underserved by the commissioner under
44	44	this chapter by rule.
45	45	SECTION 2. Section 2211.051, Insurance Code, is amended to
46	46	read as follows:
47	47	Sec. 2211.051. ESTABLISHMENT OF FAIR PLAN. (a) The
48	48	commissioner may establish a Fair Access to Insurance Requirements
49	49	Plan to deliver:
50	50	(1) residential property insurance to residents of
51	51	this state in underserved areas designated under Section
52	52	2211.152(b), if the commissioner determines, after a public
53	53	hearing, that:
54	54	(A) [(1)] in all or any part of the state,
55	55	residential property insurance is not reasonably available in the
56	56	voluntary market to a substantial number of insurable risks; or
57	57	(B) [(2)] at least 25 percent of the applicants
58	58	to the residential property market assistance program who are
59	59	qualified under that program's plan of operation have not been
60	60	placed with an insurer in the preceding six months; and
61	61	(2) commercial property insurance to those persons
62	62	within a group or groups that share similar risk characteristics
63	63	and who have an insurable interest in commercial property in
64	64	underserved areas designated under Section 2211.152(c), if the
65	65	commissioner determines, after a public hearing, that in all or any
66	66	part of the state commercial property insurance is not reasonably
67	67	available in the voluntary market to that group or groups.
68	68	(b) The commissioner has sole discretion to designate:
69	69	(1) the underserved areas of this state, as designated
70	70	under Section 2211.152(c), in which the FAIR Plan may provide
71	71	commercial property insurance; and
72	72	(2) those persons and risk characteristics that
73	73	establish a group or groups whose members share similar risk
74	74	characteristics for the purposes of this chapter, including by
75	75	defining a group as including all persons seeking commercial
76	76	property insurance.
77	77	(c) In establishing eligibility for commercial property
78	78	insurance, the commissioner may consider:
79	79	(1) whether such a determination creates an adverse
80	80	impact to the association's exposure; and
81	81	(2) any other factors the commissioner considers
82	82	relevant.
83	83	SECTION 3. Section 2211.054, Insurance Code, is amended to
84	84	read as follows:
85	85	Sec. 2211.054. CONTENTS OF PLAN OF OPERATION. The plan of
86	86	operation must:
87	87	(1) provide for a nonprofit association to issue
88	88	[residential] property insurance under this chapter and distribute
89	89	the losses and expenses in writing that insurance in this state;
90	90	(2) provide that all insurers that write [residential]
91	91	property insurance shall participate in the association in
92	92	accordance with Sections 2211.101(b) and (c);
93	93	(3) provide that a participating insurer is entitled
94	94	to receive credit in accordance with Section 2211.101(d);
95	95	(4) provide for the immediate binding of eligible
96	96	risks;
97	97	(5) provide for the use of premium installment payment
98	98	plans, adequate marketing, and service facilities;
99	99	(6) provide for the establishment of reasonable
100	100	service standards;
101	101	(7) provide procedures for efficient, economical,
102	102	fair, and nondiscriminatory administration of the association;
103	103	(8) provide procedures for determining the net level
104	104	of participation required for each insurer in the association;
105	105	(9) provide for the use of deductibles and other
106	106	underwriting devices;
107	107	(10) provide for assessment of all members in amounts
108	108	sufficient to operate the association;
109	109	(11) establish maximum limits of liability to be
110	110	placed through the program;
111	111	(12) establish commissions to be paid to the insurance
112	112	agents submitting applications;
113	113	(13) provide that the association issue policies in
114	114	the association's own name;
115	115	(14) provide reasonable underwriting standards for
116	116	determining insurability of a risk;
117	117	(15) provide procedures for the association to assume
118	118	and cede reinsurance; and
119	119	(16) provide any other procedure or operational matter
120	120	the governing committee or the commissioner considers necessary.
121	121	SECTION 4. Section 2211.056(a), Insurance Code, is amended
122	122	to read as follows:
123	123	(a) The association shall file with the commissioner for
124	124	approval the proposed rates and supplementary rating [supplemental
125	125	rate] information to be used in connection with the issuance of
126	126	insurance policies or endorsements.
127	127	SECTION 5. Subchapter B, Chapter 2211, Insurance Code, is
128	128	amended by adding Section 2211.060 to read as follows:
129	129	Sec. 2211.060. COMMERCIAL PROPERTY INSURANCE LIABILITY
130	130	LIMITS. (a) Except as provided by Subsections (c) and (d), maximum
131	131	liability limits for the coverage on a single insurable commercial
132	132	property may not exceed $3,200,000 for:
133	133	(1) a structure; and
134	134	(2) the corporeal movable property located in that
135	135	structure, and as an extension of coverage, away from those
136	136	premises, as provided under the policy.
137	137	(b) This section does not apply to insurable commercial
138	138	property that is:
139	139	(1) owned by, and at least 75 percent of which is
140	140	occupied by, a governmental entity; or
141	141	(2) not owned by, but is wholly and exclusively
142	142	occupied by, a governmental entity.
143	143	(c) Not later than September 30 of each year, the governing
144	144	committee shall propose inflation adjustments to the maximum
145	145	liability limits imposed under Subsection (a) in increments of
146	146	$1,000, rounded to the nearest $1,000, based on an index that the
147	147	governing committee determines accurately reflects changes in the
148	148	cost of construction or commercial property values in the relevant
149	149	area.
150	150	(d) The governing committee may propose additional
151	151	increases in the maximum liability limits as the governing
152	152	committee determines necessary to implement the purposes of this
153	153	chapter.
154	154	(e) The commissioner shall approve the inflation
155	155	adjustments and proposed additional increases, with or without
156	156	modifications, or disapprove the adjustments and proposed
157	157	additional increases.
158	158	SECTION 6. Section 2211.101, Insurance Code, is amended to
159	159	read as follows:
160	160	Sec. 2211.101. COVERAGE PROVIDED TO INSUREDS IN UNDERSERVED
161	161	AREA. (a) In accordance with the plan of operation, the
162	162	association shall develop and administer a program for
163	163	participation by each insurer that writes [residential] property
164	164	insurance in this state.
165	165	(b) Except as provided by this subsection, each insurer, as
166	166	a condition of the insurer's authority to engage in the business of
167	167	[residential] property insurance in this state, shall participate
168	168	in the association in accordance with this chapter, including
169	169	participating in the association's assessments in the proportion
170	170	that the insurer's net direct property insurance premiums written
171	171	in this state during the preceding calendar year bear to the
172	172	aggregate net direct property insurance premiums written in this
173	173	state by all participating insurers. The Texas Windstorm Insurance
174	174	Association established by Chapter 2210 may not participate in the
175	175	association for any purpose.
176	176	(c) An insurer's participation under Subsection (b) in the
177	177	association's assessments must be determined in accordance with the
178	178	association's plan of operation [residential property statistical
179	179	plan adopted by the commissioner].
180	180	(d) A participating insurer is entitled to receive credit
181	181	for similar property insurance voluntarily written in an
182	182	underserved area. The participation of an insurer entitled to
183	183	receive credit under this subsection must be reduced in accordance
184	184	with the plan of operation.
185	185	SECTION 7. Section 2211.104, Insurance Code, is amended by
186	186	amending Subsection (c) and adding Subsection (f) to read as
187	187	follows:
188	188	(c) The insurer shall compute the amount of the surcharge
189	189	under Subsection (b) as a uniform percentage of the premium on each
190	190	policy described by Subsection (b). The percentage must be equal to
191	191	one-third of the ratio of the amount of the participating insurer's
192	192	assessment or service fee payment to the amount of the insurer's
193	193	direct written [earned] premiums, as reported to the department in
194	194	the insurer's financial statement for the calendar year preceding
195	195	the year in which the assessment or service fee payment is made so
196	196	that, over the three-year period, the aggregate of all surcharges
197	197	by the insurer under this section is at least equal to the amount of
198	198	the assessment or service fee payment.
199	199	(f) Notwithstanding Subsections (a)-(d), if the public
200	200	securities are issued as authorized by Subsection (a)(1), the
201	201	commissioner may establish a schedule providing for collection of
202	202	the service fee over the full term of the securities and limiting
203	203	insurers to collecting the service fee in accordance with that
204	204	schedule.
205	205	SECTION 8. Section 2211.151, Insurance Code, is amended to
206	206	read as follows:
207	207	Sec. 2211.151. MANDATORY COVERAGE PROVIDED TO CERTAIN
208	208	INSUREDS. (a) As authorized by the commissioner under Section
209	209	2211.051(a)(1), the [The] association shall make residential
210	210	property insurance available to each applicant in an underserved
211	211	area whose property is insurable in accordance with reasonable
212	212	underwriting standards but who, after diligent efforts, is unable
213	213	to obtain residential property insurance through the voluntary
214	214	market, as evidenced by two declinations from insurers authorized
215	215	to engage in the business of, and writing, residential property
216	216	insurance in this state.
217	217	(b) As authorized by the commissioner under Section
218	218	2211.051(a)(2), the association shall make commercial property
219	219	insurance available to each applicant who:
220	220	(1) has an insurable interest in real or tangible
221	221	commercial property that is insurable in accordance with reasonable
222	222	underwriting standards and located at a fixed location in the area
223	223	designated by the commissioner under Section 2211.051(a)(2);
224	224	(2) shares the risk characteristics of the group
225	225	designated by the commissioner under Section 2211.051(a)(2); and
226	226	(3) after diligent efforts, is unable to obtain
227	227	commercial property insurance through the voluntary market, as
228	228	evidenced by two declinations from insurers authorized to engage in
229	229	the business of, and writing, that commercial property insurance in
230	230	this state.
231	231	SECTION 9. Section 2211.152, Insurance Code, is amended to
232	232	read as follows:
233	233	Sec. 2211.152. DESIGNATION OF AREA AS UNDERSERVED. (a) The
234	234	commissioner by rule shall designate the areas determined to be
235	235	underserved.
236	236	(b) In determining which areas to designate as underserved
237	237	for residential property insurance, the commissioner shall
238	238	consider the factors specified in Section 2004.002.
239	239	(c) In determining which areas to designate as underserved
240	240	for commercial property insurance, the commissioner shall
241	241	consider:
242	242	(1) whether commercial property insurance is not
243	243	reasonably available to those persons within a group or groups that
244	244	share similar risk characteristics and who have an insurable
245	245	interest in commercial property in the area; and
246	246	(2) any other factors the commissioner considers
247	247	relevant.
248	248	SECTION 10. Section 2211.153, Insurance Code, is amended to
249	249	read as follows:
250	250	Sec. 2211.153. INSPECTION BUREAU. The association, with
251	251	the approval of the commissioner, shall designate one or more
252	252	organizations as the inspection bureau. The inspection bureau
253	253	shall:
254	254	(1) make inspections to determine the condition of a
255	255	property for which [residential] property insurance is sought; and
256	256	(2) perform other duties authorized by the association
257	257	or the commissioner.
258	258	SECTION 11. Sections 2211.154(a) and (c), Insurance Code,
259	259	are amended to read as follows:
260	260	(a) A person who has an insurable interest in real or
261	261	tangible personal property at a fixed location in an underserved
262	262	area and who, after diligent effort, is unable to obtain
263	263	[residential] property insurance, as evidenced by two current
264	264	declinations from insurers authorized to engage in the business of
265	265	[residential] property insurance in this state and actually writing
266	266	the [residential] property insurance applied for in this state, is
267	267	entitled on application to the association to an inspection and
268	268	evaluation of the property by representatives of the inspection
269	269	bureau.
270	270	(c) Promptly after the application is received, the
271	271	inspection bureau shall make an inspection and file an inspection
272	272	report with the association. The inspection report must be made
273	273	available to the applicant on request. The association shall
274	274	prescribe the manner and scope of the inspection and inspection
275	275	report for [residential] property in accordance with the plan of
276	276	operation.
277	277	SECTION 12. Section 2211.155, Insurance Code, is amended to
278	278	read as follows:
279	279	Sec. 2211.155. INSPECTION RESULTS; REINSPECTION. (a) If,
280	280	after an inspection, the inspection bureau determines that
281	281	[residential] property meets the underwriting standards
282	282	established in the plan of operation, the applicant must be
283	283	informed in writing of that determination and the association shall
284	284	issue a policy or binder. If the [residential] property does not
285	285	meet the underwriting standards, the applicant must be informed in
286	286	writing of the reason for the failure of the [residential] property
287	287	to meet the standards.
288	288	(b) If, at any time, an applicant whose [residential]
289	289	property did not meet the underwriting standards makes improvements
290	290	to the property or the property's condition that the applicant
291	291	believes are sufficient to make the property meet the standards, an
292	292	inspection bureau representative shall reinspect the property on
293	293	request. In any case, the applicant is eligible for one
294	294	reinspection on or before the 60th day after the date of the initial
295	295	inspection.
296	296	(c) If, on reinspection, the [residential] property meets
297	297	the underwriting standards, the applicant must be informed in
298	298	writing of that fact and the association shall issue a policy or
299	299	binder.
300	300	SECTION 13. Section 2211.201, Insurance Code, is amended to
301	301	read as follows:
302	302	Sec. 2211.201. PURPOSE. The legislature finds that issuing
303	303	public securities to provide a method to raise funds to provide
304	304	[residential] property insurance in this state through the
305	305	association is to benefit the public and to further a public
306	306	purpose.
307	307	SECTION 14. Section 2211.209(e), Insurance Code, is amended
308	308	to read as follows:
309	309	(e) As a condition of engaging in the business of insurance
310	310	in this state, a participating insurer agrees that, if the insurer
311	311	leaves the property insurance market in this state, the insurer
312	312	remains obligated to pay the insurer's share of the service fee
313	313	assessed under this section until the public securities are
314	314	retired. The amount assessed against an insurer under this
315	315	subsection must be:
316	316	(1) proportionate to the insurer's share of the
317	317	property insurance market[, including residential property
318	318	insurance,] in this state as of the last complete reporting period
319	319	before the date the insurer ceases to engage in the property
320	320	insurance business in this state; and
321	321	(2) based on the insurer's gross premiums for property
322	322	insurance[, including residential property insurance,] for the
323	323	insurer's last reporting period.
324	324	SECTION 15. Not later than December 1, 2009, the governing
325	325	committee of the FAIR Plan shall amend the plan's plan of operation
326	326	to reflect the changes in law made by this Act. On January 1, 2010,
327	327	the FAIR Plan shall begin issuing commercial property insurance in
328	328	accordance with the plan of operation.
329	329	SECTION 16. This Act takes effect September 1, 2009.