By: Smithee, et al. (Senate Sponsor - Carona) H.B. No. 272
(In the Senate - Received from the House May 12, 2011;
May 12, 2011, read first time and referred to Committee on Business
and Commerce; May 20, 2011, reported adversely, with favorable
Committee Substitute by the following vote: Yeas 6, Nays 3;
May 20, 2011, sent to printer.)
COMMITTEE SUBSTITUTE FOR H.B. No. 272 By: Carona
A BILL TO BE ENTITLED
AN ACT
relating to the operation of the Texas Windstorm Insurance
Association and to the resolution of certain disputes concerning
claims made to that association; providing penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 83.002, Insurance Code, is amended by
adding Subsection (c) to read as follows:
(c) This chapter also applies to:
(1) a person appointed as a qualified inspector under
Section 2210.254 or 2210.255; and
(2) a person acting as a qualified inspector under
Section 2210.254 or 2210.255 without being appointed as a qualified
inspector under either of those sections.
SECTION 2. Section 541.152, Insurance Code, is amended by
amending Subsection (b) and adding Subsection (c) to read as
follows:
(b) Except as provided by Subsection (c), on [On] a finding
by the trier of fact that the defendant knowingly committed the act
complained of, the trier of fact may award an amount not to exceed
three times the amount of actual damages.
(c) Subsection (b) does not apply to an action under this
subchapter brought against the Texas Windstorm Insurance
Association by a person who is insured under Chapter 2210.
SECTION 3. Section 542.052, Insurance Code, is amended to
read as follows:
Sec. 542.052. APPLICABILITY OF SUBCHAPTER. (a) This
subchapter applies to any insurer authorized to engage in business
as an insurance company or to provide insurance in this state,
including:
(1) a stock life, health, or accident insurance
company;
(2) a mutual life, health, or accident insurance
company;
(3) a stock fire or casualty insurance company;
(4) a mutual fire or casualty insurance company;
(5) a Mexican casualty insurance company;
(6) a Lloyd's plan;
(7) a reciprocal or interinsurance exchange;
(8) a fraternal benefit society;
(9) a stipulated premium company;
(10) a nonprofit legal services corporation;
(11) a statewide mutual assessment company;
(12) a local mutual aid association;
(13) a local mutual burial association;
(14) an association exempt under Section 887.102;
(15) a nonprofit hospital, medical, or dental service
corporation, including a corporation subject to Chapter 842;
(16) a county mutual insurance company;
(17) a farm mutual insurance company;
(18) a risk retention group;
(19) a purchasing group;
(20) an eligible surplus lines insurer; and
(21) except as provided by Section 542.053(b), a
guaranty association operating under Chapter 462 or 463.
(b) This subchapter does not apply to the Texas Windstorm
Insurance Association.
SECTION 4. Subchapter A, Chapter 2210, Insurance Code, is
amended by adding Sections 2210.0081 and 2210.010 to read as
follows:
Sec. 2210.0081. CERTAIN ACTIONS BROUGHT AGAINST
ASSOCIATION BY COMMISSIONER. In an action brought by the
commissioner against the association under Chapter 441:
(1) the association's inability to satisfy obligations
under Subchapter M related to the issuance of public securities
under this chapter constitutes a condition that makes the
association's continuation in business hazardous to the public or
to the association's policyholders for the purposes of Section
441.052;
(2) the time for the association to comply with the
requirements of supervision or for the conservator to complete the
conservator's duties, as applicable, is limited to three years from
the date the commissioner commences the action against the
association; and
(3) unless the commissioner takes further action
against the association under Chapter 441, as a condition of
release from supervision, the association must demonstrate to the
satisfaction of the commissioner that the association is able to
satisfy obligations under Subchapter M related to the issuance of
public securities under this chapter.
Sec. 2210.010. CERTAIN CONDUCT IN DISPUTE RESOLUTION
PROHIBITED. (a) For purposes of this section, "presiding officer"
includes a judge, arbitrator, appraiser, or panel member.
(b) If a person insured under this chapter is assigned to
act as presiding officer to preside over or resolve a dispute
involving the association and another person insured under this
chapter, the presiding officer shall, not later than the seventh
day after the date of assignment, give written notice to the
association and to each other party to the dispute, or the
association's or other party's attorney, that the presiding officer
is insured under this chapter.
(c) In a proceeding with respect to which the commissioner
has authority to designate the presiding officer, the association
or other party that receives notice under Subsection (b) may file
with the commissioner a written objection to the assignment of the
presiding officer to the dispute. The written objection must
contain the factual basis on which the association or other party
objects to the assignment.
(d) The commissioner shall assign a different presiding
officer to the dispute if, after reviewing the objection filed
under Subsection (c), the commissioner determines that the
presiding officer originally assigned to the dispute has a direct
financial or personal interest in the outcome of the dispute.
(e) The association or another party must file an objection
under Subsection (c) not later than the earlier of:
(1) the seventh day after the date the association or
other party receives actual notice that the presiding officer is
insured under this chapter; or
(2) the seventh day before the date of the first
proceeding concerning the dispute.
(f) The commissioner may, on a showing of good cause, extend
the deadline to file an objection under Subsection (e).
SECTION 5. Section 2210.054(a), Insurance Code, is amended
to read as follows:
(a) The association shall file annually with the department
and the state auditor's office a statement covering periods
designated by the department that summarizes the transactions,
conditions, operations, and affairs of the association during the
preceding year.
SECTION 6. Section 2210.056(c), Insurance Code, is amended
to read as follows:
(c) On dissolution of the association, all assets of the
association, other than assets pledged for the repayment of public
securities issued under this chapter, revert to this state.
SECTION 7. Subchapter B, Chapter 2210, Insurance Code, is
amended by adding Sections 2210.058, 2210.059, and 2210.061 to read
as follows:
Sec. 2210.058. AUDIT OF ASSOCIATION. (a) The association
is subject to audit by the state auditor and shall pay the costs
incurred by the state auditor in performing an audit under this
section.
(b) The association shall pay the costs described by
Subsection (a) promptly after receipt of a statement from the state
auditor's office regarding the amount of those costs.
Sec. 2210.059. CLAIMS PRACTICES AUDIT. (a) If the
commissioner determines that 100 or more claims have been filed
under association policies the bases of which are damage to insured
property caused by the same storm, the department shall conduct a
random audit of the claim files of those claims to:
(1) determine whether the association is adequately
and properly documenting claims decisions in each claim file; and
(2) ensure that each claim is being handled
appropriately, including being handled in accordance with the terms
of the policy under which the claim is filed.
(b) The department shall conduct an audit required under
this section as soon as possible after the filing of the 100th claim
described by Subsection (a) to ensure the quality of the process
with which the association is handling claims described by
Subsection (a).
(c) If, following an audit conducted under this section, the
commissioner determines that the association is not adequately and
properly documenting claims decisions or that claims described by
Subsection (a) are not otherwise being handled appropriately, the
commissioner shall:
(1) notify the board of directors of that
determination; and
(2) identify the manner in which the association
should correct any deficiencies identified by the commissioner.
Sec. 2210.061. CONTRACTORS AND MANAGERIAL EMPLOYEES:
COMPENSATION AND BONUSES. The association shall post on the
association's Internet website any compensation, monetary or
otherwise, and any bonus that, when aggregated, exceed $100,000 in
a 12-month period and that are paid or given by the association to:
(1) a vendor or independent contractor with whom the
association has a contract; and
(2) an association employee who serves in a managerial
capacity.
SECTION 8. Section 2210.071, Insurance Code, is amended by
adding Subsection (c) to read as follows:
(c) Losses not paid under Subsection (b) shall be paid from
the proceeds from public securities issued in accordance with this
subchapter and Subchapter M.
SECTION 9. Section 2210.072, Insurance Code, is amended by
amending Subsections (a) and (b) and adding Subsections (a-1) and
(a-2) to read as follows:
(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.
Class 1 public securities may be issued under this section at any
time during a calendar year, on request of the association and
approval by the commissioner, if the association determines that
insured losses in the calendar year have exceeded, or are likely to
exceed, the amount available for the payment of losses under
Section 2210.071(b).
(a-1) The commissioner by rule shall establish, for each
calendar year, the maximum principal amount in which public
securities may be issued under this section before an occurrence or
series of occurrences that results in insured losses. The
commissioner shall consult the Texas Public Finance Authority when
adopting rules under this subsection.
(a-2) [on or after the date of any occurrence or series of
occurrences that results in insured losses.] Public securities
issued under this section must be repaid within a period not to
exceed 14 [10] years, and may be repaid sooner if the board of
directors elects to do so and the commissioner approves.
(b) Public securities described by Subsection (a):
(1) shall be issued as necessary in a principal amount
not to exceed $1 billion in the aggregate whether for a single
occurrence or a series of occurrences that takes place in a calendar
[per] year and results in insured losses; and
(2) may be issued, in one or more issuances or
tranches, during the calendar year in which the occurrence or
series of occurrences occurs or, if the public securities cannot
reasonably be issued in the calendar year in which the occurrence or
series of occurrences takes place, during a subsequent calendar
year.
SECTION 10. Section 2210.073, Insurance Code, is amended by
amending Subsection (b) and adding Subsection (c) to read as
follows:
(b) Public securities described by Subsection (a):
(1) may be issued as necessary in a principal amount
not to exceed $1 billion in the aggregate whether for a single
occurrence or a series of occurrences that takes place in a calendar
[per] year and results in insured losses; and
(2) may be issued, in one or more issuances or
tranches, during the calendar year in which the occurrence or
series of occurrences occurs or, if the public securities cannot
reasonably be issued in the calendar year in which the occurrence or
series of occurrences takes place, during a subsequent calendar
year.
(c) If the losses are paid with public securities described
by this section, the public securities shall be repaid in the manner
prescribed by Subchapter M.
SECTION 11. Section 2210.074, Insurance Code, is amended by
amending Subsection (b) and adding Subsection (c) to read as
follows:
(b) Public securities described by Subsection (a):
(1) may be issued as necessary in a principal amount
not to exceed $500 million in the aggregate whether for a single
occurrence or a series of occurrences that takes place in a calendar
[per] year and results in insured losses; and
(2) may be issued, in one or more issuances or
tranches, during the calendar year in which the occurrence or
series of occurrences occurs or, if the public securities cannot
reasonably be issued in the calendar year in which the occurrence or
series of occurrences takes place, during a subsequent calendar
year.
(c) If the losses are paid with public securities described
by this section, the public securities shall be repaid in the manner
prescribed by Subchapter M through member assessments as provided
by this section. The association shall notify each member of the
association of the amount of the member's assessment under this
section. 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. A member of the association may not
recoup an assessment paid under this subsection through a premium
surcharge or tax credit.
SECTION 12. Section 2210.075, Insurance Code, is amended to
read as follows:
Sec. 2210.075. REINSURANCE. (a) Before any occurrence or
series of occurrences, an insurer may elect to purchase reinsurance
to cover an assessment for which the insurer would otherwise be
liable under Section 2210.074(c) [2210.074(b)].
(b) An insurer must notify the board of directors, in the
manner prescribed by the association whether the insurer will be
purchasing reinsurance. If the insurer does not elect to purchase
reinsurance under this section, the insurer remains liable for any
assessment imposed under Section 2210.074(c) [2210.074(b)].
SECTION 13. Section 2210.102, Insurance Code, is amended by
adding Subsection (i) to read as follows:
(i) Notwithstanding Subsection (f), for a vacancy occurring
in a position under Subsection (b), the commissioner may appoint,
for the lesser of 120 days or until the vacancy is filled, a person
who has demonstrated knowledge in insurance principles. This
subsection does not apply to a vacancy due to the expiration of a
term occurring under Section 2210.103. This subsection expires
December 31, 2012, and any appointment in effect on that date is
continued until the expiration of the term of the appointment.
SECTION 14. Section 2210.105, Insurance Code, is amended by
amending Subsections (a) and (b) and adding Subsections (b-1), (e),
and (f) to read as follows:
(a) Except for an emergency meeting, the association shall:
(1) notify the department not later than the 11th day
before the date of a meeting of the board of directors or of the
members of the association; and
(2) not later than the seventh day before the date of a
meeting of the board of directors, post notice of the meeting on the
association's Internet website and the department's Internet
website.
(b) Except for a closed meeting authorized by Subchapter D,
Chapter 551, Government Code, a meeting of the board of directors or
of the members of the association is open to[:
[(1) the commissioner or the commissioner's designated
representative; and
[(2)] the public.
(b-1) The commissioner or the commissioner's designated
representative may attend a meeting of the board of directors or the
members of the association, including a closed meeting authorized
by Subchapter D, Chapter 551, Government Code, except for those
portions of a closed meeting that involve the rendition of legal
advice to the board concerning a regulatory matter or that would
constitute an ex parte communication with the commissioner.
(e) The association shall:
(1) broadcast live on the association's Internet
website all meetings of the board of directors, other than closed
meetings; and
(2) archive the recording of a meeting until the
second anniversary of the meeting.
(f) The presence of the commissioner or the commissioner's
designated representative at a closed meeting does not waive or
impair any privilege, including attorney-client privilege, that
exists in statute or at common law.
SECTION 15. Section 2210.107, Insurance Code, is amended to
read as follows:
Sec. 2210.107. PRIMARY BOARD OBJECTIVES; REPORT. (a) 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,
including that claims against the association are promptly and
fairly resolved.
(b) Every two months, the general manager of the association
shall submit to the board a report evaluating the extent to which
the association met the objectives described by Subsection (a) in
the two-month period immediately preceding the date of the report.
(c) Not later than June 1 of each year, the association
shall submit to the commissioner, the legislative oversight board
established under Subchapter N, the governor, the lieutenant
governor, and the speaker of the house of representatives a report
evaluating the extent to which the board met the objectives
described by Subsection (a) in the 12-month period immediately
preceding the date of the report.
SECTION 16. Subchapter C, Chapter 2210, Insurance Code, is
amended by adding Section 2210.108 to read as follows:
Sec. 2210.108. OPEN MEETINGS AND OPEN RECORDS. (a) Except
as specifically provided by this chapter or another law, the
association is subject to Chapters 551 and 552, Government Code.
(b) Except as provided by Subsection (c), the following
information is exempt from disclosure under Chapter 552, Government
Code:
(1) a name, address, telephone number, tax
identification number, social security number, or policy or claim
number of a person insured under this chapter;
(2) policy information related to:
(A) insured amounts; or
(B) insured items that identify specific
property or could reasonably be used to identify specific property;
(3) claim file information, including photographs and
descriptive reports, that identifies specific property or could
reasonably be used to identify specific property; and
(4) other information that could be considered
personally identifiable financial information.
(c) This section may not be construed to limit a request:
(1) by a person insured under this chapter, or the
person's counsel, for information contained in that person's
association policy or for claim information related to a loss
claimed under that policy;
(2) by the commissioner or the department for
information for a purpose authorized under this code, including for
the purposes of developing and implementing incentive programs
under Sections 2210.009(b) and 2210.053(b);
(3) for aggregate policy, coverage, and claims
information; or
(4) for discovery in a judicial or administrative
proceeding.
SECTION 17. 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
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 every three calendar years is also required with
an application for renewal of an association policy.
(b) A property and casualty agent must submit an application
for initial [the] insurance coverage on behalf of the applicant on
forms prescribed by the association. The association shall develop
a simplified renewal process that allows for the acceptance of an
application for renewal coverage, and payment of premiums, from a
property and casualty agent or a person insured under this chapter.
An [The] application for initial or renewal coverage must contain:
(1) 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; and
(2) [. Each application for initial or renewal
coverage must also contain] a statement that the agent acting on
behalf of the applicant 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 18. Section 2210.203, Insurance Code, is amended by
amending Subsections (a-1) and (c) and adding Subsections (a-2) and
(a-3) to read as follows:
(a-1) [This subsection applies only to a structure
constructed, altered, remodeled, or enlarged on or after September
1, 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 be insured [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, or is a residential
structure located in an area described by Section 2210.004(g)(2),
[and if flood insurance under that federal program is available,]
the association may not issue an insurance policy for initial or
renewal coverage unless evidence is submitted to the association
that the property to be covered under the policy is also covered by
a flood insurance policy that has a deductible or self-insurance
amount comparable to the association policy to be issued and that is
issued under the National Flood Insurance Program or by an insurer
in an aggregate amount that is:
(1) equal to or greater than the amount of coverage
under the policy to be issued by the association; or
(2) equal to the maximum amount obtainable through the
National Flood Insurance Program or an insurer.
(a-2) Subsection (a-1) does not apply to property for which
flood insurance is not available under the National Flood Insurance
Program [is submitted to the association].
(a-3) 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
required under Subsection (a-1) to a [the] prospective insured, if
that coverage is available.
(c) A policy is automatically [may be] renewed annually [on
application for renewal] as long as the property continues to be
insurable property.
SECTION 19. Subchapter E, Chapter 2210, Insurance Code, is
amended by adding Sections 2210.205, 2210.210, and 2210.211 to read
as follows:
Sec. 2210.205. REQUIRED POLICY PROVISIONS: DEADLINE FOR
FILING CLAIM; NOTICE CONCERNING DISPUTE RESOLUTION. (a) A
windstorm and hail insurance policy issued by the association must:
(1) require an insured to file a claim under the policy
not later than the first anniversary of the date on which the loss
that is the basis of the claim occurs; and
(2) contain a conspicuous notice concerning the
resolution of disputes under the policy, including:
(A) describing the appraisal process under
Section 2210.576;
(B) describing the alternative dispute
resolution process under Section 2210.577; and
(C) stating that compliance with the provisions
described by Paragraphs (A) and (B) is a condition precedent to
seeking administrative relief under Subchapter L-1.
(b) The association shall extend the one-year period
described by Subsection (a)(1) for an additional period not to
exceed 120 days if, before the 120th day after the expiration of the
one-year period, the insured shows good cause in a written request
to the association.
Sec. 2210.210. COVERAGE OF CERTAIN STRUCTURES PROHIBITED.
The association may not issue coverage for a wind turbine
regardless of whether the turbine could otherwise be considered
insurable property under this chapter.
Sec. 2210.211. PROOF OF OTHER COVERAGE REQUIRED FOR
SETTLEMENT OF CERTAIN CLAIMS; CLAIMS PAYMENT LIMITED. (a) This
section applies only to a claim filed under an association policy
the issuance or renewal of which, under Section 2210.203(a-1),
requires evidence of coverage by a flood insurance policy.
(b) The association may not pay or settle a portion of a
claim filed under a policy described by Subsection (a) if:
(1) that portion of the claim is for damage that is
covered by the flood insurance policy, if the required flood
insurance coverage was in effect on the date the damage occurred; or
(2) that portion of the claim is for damage that would
have been covered by the flood insurance policy, if the required
flood insurance coverage was not in effect on the date the damage
occurred.
SECTION 20. Section 2210.254, Insurance Code, is amended by
adding Subsection (e) to read as follows:
(e) The department may establish an annual renewal period
for persons appointed as qualified inspectors.
SECTION 21. Subchapter F, Chapter 2210, Insurance Code, is
amended by adding Section 2210.2551 to read as follows:
Sec. 2210.2551. EXCLUSIVE ENFORCEMENT AUTHORITY; RULES.
(a) The department has exclusive authority over all matters
relating to the appointment and oversight of qualified inspectors
for purposes of this chapter.
(b) The commissioner by rule shall establish criteria to
ensure that a person seeking appointment as a qualified inspector
under this subchapter, including an engineer seeking appointment
under Section 2210.255, possesses the knowledge, understanding,
and professional competence to perform windstorm inspections under
this chapter and to comply with other requirements of this chapter.
SECTION 22. The heading to Section 2210.256, Insurance
Code, is amended to read as follows:
Sec. 2210.256. DISCIPLINARY PROCEEDINGS REGARDING
APPOINTED INSPECTORS AND CERTAIN OTHER PERSONS.
SECTION 23. Section 2210.256, Insurance Code, is amended by
adding Subsection (a-1) to read as follows:
(a-1) In addition to any other action authorized under this
section, the commissioner ex parte may enter an emergency cease and
desist order under Chapter 83 against a qualified inspector, or a
person acting as a qualified inspector, if:
(1) the commissioner believes that:
(A) the qualified inspector has:
(i) through submitting or failing to submit
to the department sealed plans, designs, calculations, or other
substantiating information, failed to demonstrate that a structure
or a portion of a structure subject to inspection meets the
requirements of this chapter and department rules; or
(ii) refused to comply with requirements
imposed under this chapter or department rules; or
(B) the person acting as a qualified inspector is
acting without appointment as a qualified inspector under Section
2210.254 or 2210.255; and
(2) the commissioner determines that the conduct
described by Subdivision (1) is fraudulent or hazardous or creates
an immediate danger to the public.
SECTION 24. Subchapter F, Chapter 2210, Insurance Code, is
amended by adding Section 2210.260 to read as follows:
Sec. 2210.260. ALTERNATIVE ELIGIBILITY FOR COVERAGE. (a)
On and after January 1, 2012, a person who has an insurable interest
in a residential structure may obtain insurance coverage through
the association for that structure without obtaining a certificate
of compliance under Section 2210.251(g) in accordance with this
section and rules adopted by the commissioner.
(b) The department may issue an alternative certification
for a residential structure if the person who has an insurable
interest in the structure demonstrates that at least one qualifying
structural building component of the structure has been:
(1) inspected by a department inspector or by a
qualified inspector; and
(2) determined to be in compliance with applicable
building code standards, as set forth in the plan of operation.
(c) The commissioner shall adopt reasonable and necessary
rules to implement this section. The rules adopted under this
section must establish which structural building components are
considered qualifying structural building components for the
purposes of Subsection (b), taking into consideration those items
that are most probable to generate losses for the association's
policyholders and the cost to upgrade those items.
(d) Except as provided in Section 2210.251(f), a person who
has an insurable interest in a residential structure that is
insured by the association as of January 1, 2012, but for which the
person has not obtained a certificate of compliance under Section
2210.251(g), must obtain an alternative certification under this
section before the association, on or after January 1, 2013, may
renew coverage for the structure.
(e) Each residential structure for which a person obtains an
alternative certification under this section must comply with:
(1) the requirements of this chapter, including
Section 2210.258; and
(2) the association's underwriting requirements,
including maintaining the structure in an insurable condition and
paying premiums in the manner required by the association.
(f) The association shall develop and implement an
actuarially sound rate, credit, or surcharge that reflects the
risks presented by structures with reference to which alternative
certifications have been obtained under this section. A rate,
credit, or surcharge under this subsection may vary based on the
number of qualifying structural building components included in a
structure with reference to which an alternative certification is
obtained under this section.
SECTION 25. The heading to Subchapter H, Chapter 2210,
Insurance Code, is amended to read as follows:
SUBCHAPTER H. RATES; DISCOUNTS AND CREDITS
SECTION 26. Sections 2210.355(b) and (g), Insurance Code,
are amended to read as follows:
(b) In adopting rates under this chapter, the following must
be considered:
(1) the past and prospective loss experience within
and outside this state of hazards for which insurance is made
available through the plan of operation, if any;
(2) expenses of operation, including acquisition
costs;
(3) a reasonable margin for profit and contingencies;
(4) payment of public security obligations for Class 1
public securities issued under this chapter, including the
additional amount of any debt service coverage determined by the
association to be required for the issuance of marketable public
securities; and
(5) [(4)] all other relevant factors, within and
outside this state.
(g) A commission paid to an agent for a windstorm and hail
insurance policy issued by the association must comply with the
commission structure approved by the commissioner under Section
2210.356 and be reasonable, adequate, not unfairly discriminatory,
and nonconfiscatory.
SECTION 27. Subchapter H, Chapter 2210, Insurance Code, is
amended by adding Section 2210.356 to read as follows:
Sec. 2210.356. AGENT COMMISSIONS. (a) The commissioner,
after receiving a recommendation from the board, shall approve a
commission structure for payment of an agent who submits an
application for coverage to the association on behalf of a person
who has an insurable interest in insurable property.
(b) The commission structure adopted by the commissioner
must be fair and reasonable, taking into consideration the amount
of work performed by an agent in submitting an application to the
association and the prevailing commission structure in the private
windstorm insurance market.
SECTION 28. Subchapter H, Chapter 2210, Insurance Code, is
amended by adding Section 2210.363 to read as follows:
Sec. 2210.363. PREMIUM DISCOUNTS; SURCHARGE CREDITS. (a)
The association may offer a person insured under this chapter an
actuarially justified premium discount on a policy issued by the
association, or an actuarially justified credit against a surcharge
assessed against the person, other than a surcharge assessed under
Subchapter M, if the construction, alteration, remodeling,
enlargement, or repair of, or an addition to, insurable property
exceeds applicable building code standards set forth in the plan of
operation.
(b) The association shall offer a person insured under this
chapter an actuarially justified premium discount on a policy
issued by the association, or an actuarially justified credit
against a surcharge assessed against the person, other than a
surcharge assessed under Subchapter M, if, in the policy period
immediately preceding the policy period for which the premium is
paid, the person chose binding arbitration offered by the
association under Section 2210.553.
(c) The commissioner shall adopt rules necessary to
implement and enforce this section.
SECTION 29. Chapter 2210, Insurance Code, is amended by
adding Subchapter I to read as follows:
SUBCHAPTER I. EXPERT PANEL
Sec. 2210.401. FUNDING AND RESOURCES. (a) At the request
of the commissioner, the association shall provide the funds and
resources necessary to implement Section 2210.402, including:
(1) employing or retaining persons to perform the
functions necessary or proper under Section 2210.402;
(2) providing administrative assistance and services,
including planning, contracting, and purchasing; and
(3) providing computer equipment and support.
(b) A person or entity employed or retained under Subsection
(a) acts solely under the direction of, and performs duties
assigned by, the commissioner.
Sec. 2210.402. EXPERT PANEL. (a) This section applies only
to losses concurrently caused by wind and tidal surges in which no
substantial portion of an insured structure, other than the
foundation of the structure, remains.
(b) The commissioner shall appoint a panel of experts to
advise the association concerning the extent to which a loss to
insurable property that is described by Subsection (a) was caused
by wind and tidal surges. The panel consists of the number of
experts determined by the commissioner, and the commissioner shall
appoint one member of the panel to serve as the presiding officer of
the panel.
(c) Members of the panel must have professional expertise
in, and be knowledgeable concerning, the geography and meteorology
of the seacoast territory as well as the scientific basis for
determining the extent to which a loss is caused by wind and tidal
surges. The areas of expertise of the panel members may include
structural engineering, hydrology, statistical science, actuarial
science, claims adjusting, and other areas of expertise determined
to be necessary and advisable by the commissioner.
(d) The panel shall meet at the request of the commissioner
or the call of the presiding officer of the panel.
(e) The panel shall investigate, collect, and evaluate the
information necessary to provide recommendations under Subsection
(f).
(f) At the request of the commissioner, the panel shall
recommend to the commissioner methods or models for determining the
extent to which a loss to insurable property may be or was caused by
wind and tidal surges with respect to any weather-related event for
geographic areas or regions designated by the commissioner. The
panel shall, at the request of the commissioner, develop both
pre-event and post-event methods or models for determining the
extent to which a loss to insurable property may be or was caused by
wind and tidal surges. The methods or models developed by the panel
shall provide guidance to the commissioner on the issue of whether
loss to insurable property resulting from a weather-related event
may be or has been caused by wind and tidal surges. The methods or
models must be based on sound scientific principles.
(g) After consideration of the recommendations made by the
panel under Subsection (f), the commissioner shall publish
guidelines that the association will use to settle or pay a claim
based on a loss described by this section.
Sec. 2210.403. RULES. The commissioner may adopt rules as
necessary to implement this subchapter.
SECTION 30. Section 2210.452(c), Insurance Code, is amended
to read as follows:
(c) At the end of each calendar year or policy year, the
association shall use the net gain from operations of the
association, including all premium and other revenue of the
association in excess of incurred losses, [and] operating expenses,
public security obligations, and public security administrative
expenses, to make payments to the trust fund, to procure
reinsurance, or to make payments to the trust fund and to procure
reinsurance.
SECTION 31. The heading to Section 2210.453, Insurance
Code, is amended to read as follows:
Sec. 2210.453. RISK TRANSFER FINANCING; REINSURANCE.
SECTION 32. Section 2210.453, Insurance Code, is amended by
adding Subsections (c), (d), and (e) to read as follows:
(c) Not later than January 1 of each year, to establish the
solvency level required under this chapter, the board of directors
shall determine the association's current probable maximum loss,
based on an average of at least two recognized catastrophe models,
as follows:
(1) for calendar years 2011 and 2012, at not less than
a one in 50 year occurrence;
(2) for calendar year 2013, at not less than a one in
75 year occurrence; and
(3) for each calendar year after calendar year 2013,
at not less than a one in 100 year occurrence.
(d) The board of directors shall, on January 1 of each year,
develop a plan to obtain pre-event risk transfer financing from
private sector sources determined by the board of directors to be
reasonable and appropriate to the association's risk of loss and in
an amount sufficient to maintain the claims paying ability of the
association in the event of a catastrophe with estimated damages of
$2.5 billion or more. The plan submitted under this subsection is
for informational purposes only and does not bind the association
to a particular course of action. The plan shall, at a minimum,
include:
(1) a certification to the governor, lieutenant
governor, speaker of the house of representatives, and commissioner
stating whether or not the required solvency level of the
association is satisfied for that calendar year;
(2) an analysis of the claims paying ability of the
association both with and without reliance upon borrowing
authorized by this chapter;
(3) consideration of the costs, availability, and
effects of reinsurance, bonds, and other risk transfer financing
mechanisms;
(4) the likelihood and maximum size of assessments
authorized by this chapter; and
(5) the probability of exhausting the association's
financial resources.
(e) If the association does not purchase reinsurance as
authorized by this section, the board, not later than June 1 of each
year, shall submit to the commissioner, the legislative oversight
board established under Subchapter N, the governor, the lieutenant
governor, and the speaker of the house of representatives a report
containing an actuarial plan for paying losses in the event of a
catastrophe with estimated damages of $2.5 billion or more. The
report submitted under this subsection is for informational
purposes only and does not bind the association to a particular
course of action.
SECTION 33. Section 2210.502, Insurance Code, is amended by
adding Subsection (e) to read as follows:
(e) Notwithstanding Subsection (a), the maximum liability
limit described by Section 2210.501(b)(1) may not exceed $1.5
million.
SECTION 34. The heading to Subchapter L, Chapter 2210,
Insurance Code, is amended to read as follows:
SUBCHAPTER L. CERTAIN APPEALS AND OTHER ACTIONS
SECTION 35. Sections 2210.551(a) and (b), Insurance Code,
are amended to read as follows:
(a) This section:
(1) does not apply to a person insured under this
chapter who is required to resolve a dispute concerning a claim
under Subchapter L-1 or who has elected binding arbitration offered
by the association under Section 2210.553; and
(2) applies only to:
(A) [(1)] a person not described by Subdivision
(1) who is insured under this chapter or an authorized
representative of the person; or
(B) [(2)] an affected insurer.
(b) A person or entity described by Subsection (a)(2) [(a)]
who is aggrieved by an act, ruling, or decision of the association
may appeal to the commissioner not later than the 30th day after the
date of that act, ruling, or decision.
SECTION 36. The heading to Section 2210.552, Insurance
Code, is amended to read as follows:
Sec. 2210.552. CLAIM DISPUTES; VENUE AND NOTICE OF INTENT
TO BRING ACTION.
SECTION 37. Section 2210.552, Insurance Code, is amended by
amending Subsection (a) and adding Subsections (e) and (f) to read
as follows:
(a) Except as provided by Sections 2210.007 and 2210.106 and
subject to Subsection (e), a person insured under this chapter who
is aggrieved by an act, ruling, or decision of the association
relating to the payment of, the amount of, or the denial of a claim
may:
(1) after providing the association the notice that
meets the requirements of Section 541.154, bring an action against
the association, including an action under Chapter 541; or
(2) if applicable, appeal the act, ruling, or decision
under Section 2210.551.
(e) A person required to resolve a dispute concerning a
claim in accordance with Subchapter L-1 may not bring an action
against the association before exhausting all remedies under
Subchapter L-1. If a person required to resolve a dispute
concerning a claim in accordance with Subchapter L-1 brings an
action against the association before exhausting all remedies under
that subchapter, the court shall abate the action until all
remedies under that subchapter have been exhausted.
(f) A claimant who prevails in an action against the
association under this section:
(1) may recover:
(A) the relief described in Sections 541.152(a)
and 2210.575; and
(B) prejudgment interest; and
(2) may not recover damages under Section 541.152(b)
of this code or treble damages under Section 17.50, Business &
Commerce Code.
SECTION 38. Subchapter L, Chapter 2210, Insurance Code, is
amended by adding Sections 2210.553 and 2210.554 to read as
follows:
Sec. 2210.553. VOLUNTARY ARBITRATION OF CERTAIN COVERAGE
AND CLAIM DISPUTES. (a) If a person insured under this chapter has
a dispute with the association involving an act, ruling, or
decision of the association relating to the payment of, the amount
of, or the denial of a claim filed by the person, the association
may offer to the person that the association and the person resolve
the dispute through binding arbitration.
(b) An arbitration under this section shall be conducted in
the manner and under rules and deadlines prescribed by the
commissioner by rule.
Sec. 2210.554. LIMITATIONS PERIOD. Notwithstanding any
other law, including Section 541.162, a person insured under this
chapter who brings an action against the association must bring the
action not later than the second anniversary of the date of the act,
ruling, or decision of the association by which the insured is
aggrieved.
SECTION 39. Chapter 2210, Insurance Code, is amended by
adding Subchapter L-1 to read as follows:
SUBCHAPTER L-1. CLAIMS: SETTLEMENT, APPRAISAL, AND DISPUTE
RESOLUTION
Sec. 2210.571. DEFINITIONS. In this subchapter:
(1) "Association policy" means a windstorm and hail
insurance policy issued by the association.
(2) "Claim" means a request for payment under an
association policy following damage to property insured under the
policy.
(3) "Claimant" means a person who makes a claim.
Sec. 2210.572. FILING OF CLAIM. Subject to Section
2210.205(b), an insured must file a claim under an association
policy not later than the first anniversary of the date on which the
damage to property that is the basis of the claim occurs.
Sec. 2210.573. RECEIPT OF NOTICE OF CLAIM. (a) Not later
than the 30th day after the date the association receives notice of
a claim, the association shall:
(1) acknowledge receipt of the claim;
(2) commence any investigation of the claim; and
(3) request from the claimant all items, statements,
and forms that the association reasonably believes, at that time,
will be required from the claimant.
(b) The association may make additional requests for
information if during the investigation of the claim the additional
requests are necessary.
(c) If the acknowledgment of receipt of a claim is not made
in writing, the association shall make a record of the date, manner,
and content of the acknowledgment.
Sec. 2210.574. NOTICE OF ACCEPTANCE OR REJECTION OF CLAIM.
(a) Except as provided by Subsection (c), the association shall
notify a claimant in writing of the acceptance or rejection of a
claim not later than the 30th day after the date the association
receives all items, statements, and forms required by the
association to secure final proof of loss.
(b) If the association rejects the claim, the notice
required by Subsection (a) must state the reasons for the
rejection.
(c) If the association is unable to accept or reject the
claim within the period specified by Subsection (a), the
association, within that same period, shall notify the claimant of
the reasons that the association needs additional time. The
association shall accept or reject the claim not later than the 30th
day after the date the association notifies a claimant under this
subsection.
Sec. 2210.575. PAYMENT OF CLAIM; DELAY IN PAYMENT OF CLAIM;
INTEREST ON CLAIM. (a) Except as provided by Subsection (b) or
(e), if the association notifies a claimant under Section 2210.574
that the association will pay a claim or part of a claim, the
association shall pay the claim not later than the 10th day after
the date notice is made.
(b) Except as provided by Subsection (e), if payment of the
claim or part of the claim is conditioned on the performance of an
act by the claimant, the association shall pay the claim not later
than the 10th day after the date the act is performed.
(c) Except as otherwise provided, if the association, after
receiving all items, statements, and forms reasonably requested and
required under Section 2210.573, delays payment of the claim for
more than 60 days, the association shall pay damages and other items
as provided by Subsection (f).
(d) Subsection (c) does not apply in a case in which it is
finally determined, in accordance with this subchapter, that a
claim received by the association is invalid and should not be paid
by the association.
(e) If the association does not have sufficient cash on hand
or available in the catastrophe reserve trust fund to comply with
this section, the commissioner by rule may extend the periods
described by Subsections (a), (b), and (c) by an additional period
not to exceed 120 days.
(f) If the association is liable for a claim under an
association policy and does not comply with the deadlines
prescribed under Subsection (a), (b), or (c) or any extension of
those deadlines under Subsection (e), or with Section 2210.573 or
2210.574, the association is liable to pay the claimant, in
addition to the amount of the claim, interest on the amount of the
claim at the rate of 18 percent a year as damages. A claimant may
bring an action as described by Section 2210.578 to enforce this
subsection.
Sec. 2210.576. DISPUTES CONCERNING AMOUNT OF LOSS. (a) If a
claimant disputes the amount of loss determined by the association,
the claimant or the association may resolve that dispute by, not
later than the 60th day after the date the claimant receives the
notice from the association that gives rise to the dispute,
requesting appraisal in accordance with the terms of the insurance
policy.
(b) The 60-day period described by Subsection (a) may be
extended for:
(1) an agreed period of time by mutual consent of the
claimant and the association; or
(2) 30 days by the claimant if, before the expiration
of the 60-day period described by Subsection (a), the claimant is
unable to retain an appraiser and provides written notice of that
inability to the association.
(c) If a claimant or the association requests appraisal
under this section, the claimant is responsible for paying any
costs incurred or charged by an appraiser retained by and on behalf
of the claimant, the association is responsible for paying any
costs incurred or charged by an appraiser retained by and on behalf
of the association, and the claimant and the association are
responsible in equal shares for any costs incurred or charged by any
umpire.
(d) Except as provided by Subsection (b), if the association
or a claimant does not demand appraisal before the expiration of the
60-day period described by Subsection (a), the association or
claimant, as applicable, waives the right to have the amount of loss
determined by appraisal.
(e) This section applies only to disputes regarding the
amount of loss and does not apply to disputes regarding the
association's determination concerning coverage for a claim or
causation of damage to property insured under an association policy
that is the basis of a claim.
(f) The appraisal decision is binding on the claimant and
the association as to the amount of loss and is subject to review
only if the claimant brings an action against the association as
described by Section 2210.578.
Sec. 2210.577. ALTERNATE DISPUTE RESOLUTION. (a) If a
claimant disputes the association's determination concerning
coverage for a claim or causation of damage to property insured
under an association policy that is the basis of a claim and
provides notice of intent to bring an action that meets the
requirements of Section 541.154, the association may require the
claimant, as a prerequisite to filing the action against the
association, to submit the dispute to alternate dispute resolution
by mediation or moderated settlement conference, as provided by
Chapter 154, Civil Practice and Remedies Code.
(b) The association must request alternate dispute
resolution of a dispute described by Subsection (a) not later than
the 60th day after the date the association receives from the
claimant notice of intent to bring an action.
(c) Alternate dispute resolution under this section must be
completed not later than the 60th day after the date a request for
alternate dispute resolution is made under Subsection (b). The
60-day period described by this subsection may be extended by the
commissioner by rule or by the association and a claimant by mutual
consent.
(d) If alternate dispute resolution is not completed before
the expiration of the 60-day period described by Subsection (c) or,
if applicable, any extension under that subsection, the claimant
may bring an action against the association as described by Section
2210.578.
(e) A moderated settlement conference under this section
may be conducted by a panel consisting of one or more impartial
third parties.
(f) The commissioner shall establish rules to implement
this section, including provisions for expediting alternate
dispute resolution, facilitating the ability of a claimant to
appear with or without counsel, and providing that formal rules of
evidence shall not apply to the proceedings.
Sec. 2210.578. ACTION BY CLAIMANT. (a) Subject to
providing notice of intent to bring an action that meets the
requirements of Section 541.154, a claimant aggrieved by an
appraisal process under Section 2210.576 or the outcome of
alternate dispute resolution under Section 2210.577 or seeking to
enforce Section 2210.575(f) may bring an action against the
association.
(b) An action brought against the association under this
section must be presided over by a judge appointed by the judicial
panel on multidistrict litigation designated under Section 74.161,
Government Code. A judge appointed under this section must be a
resident of a first tier coastal county or a second tier coastal
county.
(c) An action brought against the association is governed by
this subchapter and Sections 2210.552 and 2210.554.
Sec. 2210.579. CONSTRUCTION WITH OTHER LAW. (a) To the
extent of any conflict between a provision of this subchapter and
any other law, the provision of this subchapter prevails.
(b) Notwithstanding any other law, the association may not
bring an action against a claimant, for declaratory or other
relief, before the 180th day after the date an appraisal under
Section 2210.576, or alternate dispute resolution under Section
2210.577, is completed.
SECTION 40. Section 2210.602, Insurance Code, is amended by
amending Subdivisions (1) and (2) and adding Subdivisions (1-a),
(1-b), (5-a), (6-a), (6-b), (6-c), and (6-d) to read as follows:
(1) "Authority" means the Texas Public Finance
Authority.
(1-a) "Board" means the board of directors of the
Texas Public Finance Authority.
(1-b) "Catastrophic event" means an occurrence or a
series of occurrences that occurs in a catastrophe area during a
calendar year and that results in insured losses and operating
expenses of the association in excess of premium and other revenue
of the association.
(2) "Class 1 public securities" means public
securities authorized to be issued [on or after an occurrence or
series of occurrences] by Section 2210.072, including a commercial
paper program authorized before the occurrence of a catastrophic
event [so long as no tranche of commercial paper is issued under the
program until after the catastrophic event].
(5-a) "Gross premium" means association premium, less
premium returned to policyholders for canceled or reduced policies.
(6-a) "Marketable" means, with reference to public
securities, securities:
(A) for which the authority has determined there
to be demonstrable market demand; and
(B) that can be rated by at least two nationally
recognized rating agencies for municipal securities in:
(i) the highest rating category for a
short-term debt instrument; or
(ii) one of the three highest rating
categories for a long-term debt instrument.
(6-b) "Member assessment trust fund" means the
dedicated trust fund established by the board and held by the Texas
Safekeeping Trust Company into which member assessments collected
under Sections 2210.613 and 2210.6135 are deposited.
(6-c) "Net premium" means gross premium, less:
(A) premium collected by the association but that
has not yet been earned by the association;
(B) earned premium expected to be paid in
connection with the disposition of losses not associated with a
catastrophic event;
(C) operating expenses; and
(D) any amounts necessary to fund or replenish a
reasonable operating reserve for the association.
(6-d) "Premium surcharge trust fund" means the
dedicated trust fund established by the board and held by the Texas
Safekeeping Trust Company into which premium surcharges collected
under Section 2210.613 are deposited.
SECTION 41. Section 2210.604, Insurance Code, is amended by
amending Subsections (b) and (c) and adding Subsection (d) to read
as follows:
(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. The
maximum principal requested under this subsection may not exceed
the amount of public securities the association, in consultation
with the authority, determines to be marketable.
(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; and
(4) provide the amount of debt service coverage for
public securities determined by the association, in consultation
with the authority, to be required for the issuance of marketable
public securities.
(d) If the amount of marketable Class 1 public securities is
insufficient to pay the excess losses for which the securities are
issued, marketable Class 2 public securities may be issued. If the
amount of marketable Class 2 public securities is insufficient to
pay the excess losses for which the securities are issued,
marketable Class 3 public securities may be issued.
SECTION 42. Section 2210.605(c), Insurance Code, is amended
to read as follows:
(c) Public securities issued under Section 2210.6136 [this
chapter] are eligible obligations under Section 404.027,
Government Code.
SECTION 43. Section 2210.608(a), Insurance Code, is amended
to read as follows:
(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;
(6) pay private financial agreements entered into by
the association as temporary sources of payment of losses and
operating expenses of the association; and
(7) reimburse the association for any cost described
by Subdivisions (1)-(6) paid by the association before issuance of
the public securities.
SECTION 44. Section 2210.609, Insurance Code, is amended to
read as follows:
Sec. 2210.609. REPAYMENT OF ASSOCIATION'S PUBLIC SECURITY
OBLIGATIONS. (a) The board and the association shall enter into an
agreement under which the association shall provide for the payment
of 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, 2210.613, [and] 2210.6135, and 2210.6136 as
applicable. Class 1, Class 2, or Class 3 public securities may be
issued on a parity or subordinate lien basis with other Class 1,
Class 2, or Class 3 public securities, respectively.
(b) If any public securities issued under this chapter are
outstanding, the authority [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,
assess members of the association under Sections 2210.613 and
2210.6135, and assess a premium surcharge if necessary.
(c) The association shall deposit all revenue collected
under Section [Sections] 2210.612 [, 2210.613, and 2210.6135] in
the public security obligation revenue fund, all revenue collected
under Section 2210.613(b) in the premium surcharge trust fund, and
all revenue collected under Sections 2210.613(a) and 2210.6135 in
the member assessment trust fund. Money deposited in a [the] fund
may be invested as permitted by general law. Money in a [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. This may include the board
establishing funds and accounts with the comptroller that the board
determines are necessary to administer and repay the public
security obligations. If the association has not transferred
amounts sufficient to pay the public security obligations to the
board's designated interest and sinking fund in a timely manner,
the board may direct the Texas Treasury Safekeeping Trust Company
to transfer from the public security obligation revenue fund, the
premium surcharge trust fund, or the member assessment trust fund
to the appropriate account the amount necessary to pay the public
security obligation.
(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,
member assessments, premium surcharges, and amounts on deposit in
the public security obligation revenue fund, the premium surcharge
trust fund, and the member assessment trust 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 public security obligation
trust fund, the premium surcharge trust fund, and the member
assessment trust fund to the extent provided in the proceedings
authorizing the credit agreement.
SECTION 45. Section 2210.610(a), Insurance Code, is amended
to read as follows:
(a) Revenues received from the premium surcharges under
Section 2210.613 and member assessments under Sections 2210.613 and
2210.6135 may be applied only as provided by this subchapter.
SECTION 46. Section 2210.611, Insurance Code, is amended to
read as follows:
Sec. 2210.611. EXCESS REVENUE COLLECTIONS AND INVESTMENT
EARNINGS. Revenue collected in any year from a premium surcharge
under Section 2210.613 and member assessments under Sections
2210.613 and 2210.6135 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
and member assessments, as applicable, 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.
SECTION 47. Section 2210.612, Insurance Code, is amended to
read as follows:
Sec. 2210.612. PAYMENT OF CLASS 1 PUBLIC SECURITIES. (a)
The association shall pay Class 1 public securities issued under
Section 2210.072 from its net premium and other revenue.
(b) The association may enter financing arrangements as
described by Section 2210.072(d) as necessary to obtain public
securities issued under Section 2210.072 [that section]. Nothing
in this subsection shall prevent the authorization and creation of
one or more programs for the issuance of commercial paper before the
date of an occurrence or series of occurrences that results in
insured losses under Section 2210.072(a) [so long as no tranche of
commercial paper is issued under a commercial paper program until
after such an occurrence].
SECTION 48. Sections 2210.613(b), (c), and (d), Insurance
Code, are amended to read as follows:
(b) Seventy percent of the cost of the public securities
shall be paid by a [nonrefundable] premium surcharge collected
under this section in an amount set by the commissioner. On
approval by the commissioner, each insurer, the association, and
the Texas FAIR Plan Association shall assess, as provided by this
section, a premium surcharge to each policyholder of a policy that
is in effect on or after the 180th day after the date the
commissioner issues notice of the approval of the public securities
[its policyholders as provided by this section]. The premium
surcharge must be set in an amount sufficient to pay, for the
duration of the issued public securities, all debt service not
already covered by available funds or member assessments and all
related expenses on the public securities.
(c) The premium surcharge under Subsection (b) shall be
assessed on all policyholders of policies that cover [who reside or
have operations in, or whose] insured property that is located in a
catastrophe area, including automobiles principally garaged in a
catastrophe area. The premium surcharge shall be assessed on [for]
each Texas windstorm and hail insurance policy and each property
and casualty insurance policy, including an automobile insurance
policy, issued for automobiles and other property located in the
catastrophe area. A premium surcharge under Subsection (b) applies
to:
(1) all policies written under the following lines of
insurance:
(A) fire and allied lines;
(B) farm and ranch owners;
(C) residential property insurance;
(D) private passenger automobile liability and
physical damage insurance; and
(E) commercial passenger automobile liability
and physical damage insurance; and
(2) the property insurance portion of a commercial
multiple peril insurance policy [that provide coverage on any
premises, locations, operations, or property located in the area
described by this subsection 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 Subsection (b) 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.
SECTION 49. Section 2210.6135(a), Insurance Code, is
amended to read as follows:
(a) The association shall pay Class 3 public securities
issued under Section 2210.074 as provided by this section through
member assessments. For the payment of the losses, the [The]
association shall assess the members of the association an amount
not to exceed $500 million per occurrence or series of occurrences
in a calendar year that results in insured losses [year 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.
SECTION 50. Subchapter M, Chapter 2210, Insurance Code, is
amended by adding Section 2210.6136 to read as follows:
Sec. 2210.6136. COMBINED SOURCES OF PAYMENT. (a) In lieu
of issuing distinct Class 1, Class 2, or Class 3 public securities,
on request of the association and approval by the commissioner, the
board may issue public securities payable from all of the sources
described in Sections 2210.612, 2210.613, and 2210.6135 with the
first source of payment being as described in Section 2210.612 to
the extent public securities described by that section are
marketable, the second source of payment being as described in
Section 2210.613, and the third source of payment being as
described in Section 2210.6135.
(b) The aggregate principal amount of public securities
issued in the manner described by this section may not exceed $2.5
billion in any consecutive 12-month period from the date of an
occurrence or series of occurrences in a calendar year that results
in insured losses in excess of premium and other revenue of the
association from available reserves of the association and
available amounts in the catastrophe reserve trust fund.
SECTION 51. Section 2210.614, Insurance Code, is amended to
read as follows:
Sec. 2210.614. REFINANCING PUBLIC SECURITIES. (a) The
association may request the board to refinance, in accordance with
Chapter 1207, Government Code, any public securities issued in
accordance with Subchapter B-1, whether Class 1, Class 2, or Class 3
public securities, with public securities payable from any of the
[same] sources described by Section 2210.612, 2210.613, 2210.6135,
or 2210.6136 [as the original public securities]. The amount of
public securities that may be refinanced under this subsection with
the proceeds of Class 1 public securities may not exceed $1 billion
for a single occurrence or a series of occurrences that takes place
in a calendar year.
(b) Notwithstanding Section 1207.006, Government Code,
public securities refinanced under this section may not have a term
that is greater than 14 years.
SECTION 52. Section 2210.616, Insurance Code, is amended to
read as follows:
Sec. 2210.616. STATE NOT TO IMPAIR PUBLIC SECURITY
OBLIGATIONS. (a) The state pledges for the benefit and protection
of financing parties, the board, and the association that the state
will not take or permit any action that would:
(1) impair the collection of member assessments and
premium surcharges or the deposit of those funds into the member
assessment trust fund or premium surcharge trust fund;
(2) reduce, alter, or impair the member assessments or
premium surcharges to be imposed, collected, and remitted to
financing parties until the principal, interest, and premium, and
any other charges incurred and contracts to be performed in
connection with the related public securities, have been paid and
performed in full; or
(3) [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.
(b) A party issuing public securities under this subchapter
may include the pledge described by Subsection (a) in any
documentation relating to those securities.
SECTION 53. Subchapter M, Chapter 2210, Insurance Code, is
amended by adding Section 2210.6165 to read as follows:
Sec. 2210.6165. PROPERTY RIGHTS. If public securities
issued under this subchapter are outstanding, the rights and
interests of the association, a successor to the association, any
member of the association, or any member of the Texas FAIR Plan
Association, including the right to impose, collect, and receive a
premium surcharge or a member assessment authorized under this
subchapter, are only contract rights until those revenues are first
pledged for the repayment of the association's public security
obligations as provided by Section 2210.609.
SECTION 54. Sections 2210.502(c) and 2210.551(e),
Insurance Code, are repealed.
SECTION 55. (a) The Texas Department of Insurance and the
Texas Windstorm Insurance Association shall jointly study whether
the association's using a single adjuster program would improve the
effectiveness and efficiency with which the association receives,
processes, settles, and pays claims filed under insurance policies
issued by the association under Chapter 2210, Insurance Code.
(b) The commissioner of insurance shall study the
feasibility of the association writing policies directly and the
impact the association writing policies directly would have on
rates for policies issued by the association. The commissioner
shall submit the finding of the study conducted under this
subsection to the board of directors of the association.
(c) The results of the studies conducted under Subsections
(a) and (b) of this section shall be included in the 2012 biennial
report submitted to the legislature by the association under
Section 2210.0025, Insurance Code.
SECTION 56. (a) A legislative interim study committee
shall conduct a study of alternative ways to provide insurance to
the seacoast territory of this state through a quasi-governmental
entity.
(b) The committee is composed of 12 members appointed as
follows:
(1) four members of the senate appointed by the
lieutenant governor;
(2) four members of the house of representatives
appointed by the speaker of the house of representatives; and
(3) four public members with a background in actuarial
science, law, business, or insurance appointed as follows:
(A) two by the governor;
(B) one by the lieutenant governor; and
(C) one by the speaker of the house of
representatives.
(c) The speaker of the house of representatives and the
lieutenant governor shall jointly designate a chair or,
alternatively, designate two co-chairs, from among the committee
membership.
(d) The committee shall:
(1) examine alternative ways to provide insurance to
the seacoast territory of this state through a quasi-governmental
entity, including providing insurance coverage through a system or
program in which insurers in this state provide insurance in the
seacoast territory of this state in proportion to the percentage of
insurance coverage provided in geographic areas of this state other
than the seacoast territory;
(2) study the residual markets for windstorm and hail
insurance in other states to determine if those markets operate
more efficiently and effectively than the residual market for
windstorm and hail insurance coverage in this state;
(3) recommend:
(A) the appropriate scope of authority and
responsibility for the entity to provide insurance to the seacoast
territory of this state;
(B) an organizational structure to exercise
authority and responsibility over the provision of insurance to the
seacoast territory of this state;
(C) a timetable for implementation; and
(D) specific amendments to state laws and rules
that are necessary to implement the committee's recommendations
under this subdivision; and
(4) estimate funding requirements to implement the
recommendations.
(e) The committee may adopt rules necessary to conduct
business under and implement this section.
(f) Except as specifically provided by this section, the
committee may operate in the same manner as a joint committee of the
82nd Legislature.
(g) Not later than December 1, 2012, the committee shall
report to the governor and the legislature the recommendations made
under this section.
SECTION 57. This Act applies only to a Texas windstorm and
hail insurance policy, and a claim or dispute arising under a Texas
windstorm and hail insurance policy, delivered, issued for
delivery, or renewed by the Texas Windstorm Insurance Association
on or after the 30th day after the effective date of this Act. A
Texas windstorm and hail insurance policy, and a claim or dispute
arising under a Texas windstorm and hail insurance policy,
delivered, issued for delivery, or renewed by the Texas Windstorm
Insurance Association before the 30th day after the effective date
of this Act, are governed by the law in effect on the date the policy
was delivered, issued for delivery, or renewed, and the former law
is continued in effect for that purpose.
SECTION 58. The Texas Windstorm Insurance Association shall
amend the association's plan of operation to conform to the changes
in law made by this Act not later than January 1, 2012.
SECTION 59. Section 2210.605(c), Insurance Code, as amended
by this Act, and Section 2210.6136, Insurance Code, as added by this
Act, apply to the issuance and repayment of public securities
issued by the Texas Windstorm Insurance Association under Chapter
2210, Insurance Code, in response to an occurrence or series of
occurrences that takes place on or after June 1, 2011. The issuance
and repayment of public securities issued by the association under
Chapter 2210, Insurance Code, before June 1, 2011, is governed by
the law as it existed immediately before the effective date of this
Act, and that law is continued in effect for that purpose.
SECTION 60. 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, 2011.
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