By: Smithee H.B. No. 3605
A BILL TO BE ENTITLED
AN ACT
relating to the payment of losses by the Texas Windstorm Insurance
Association
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 2210.003, Insurance Code, is amended to
read as follows:
Sec. 2210.003. GENERAL DEFINITIONS. In this chapter,
unless the context clearly indicates otherwise:
(1) "Accident year" means the year in which a
windstorm or hail event or events occur that results in insured
losses, regardless of when the insured losses are ultimately paid.
(1)(2) "Association" means the Texas Windstorm
Insurance Association.
(2)(3) "Board of directors" means the board of
directors of the association.
(3)(4) "Catastrophe area" means a municipality, a part
of a municipality, a county, or a part of a county designated by the
commissioner under Section 2210.005.
(3-a)(5) "Catastrophe reserve trust fund" means the
trust fund established under Subchapter J.
(6) "Exposure to loss" means a measurement for
determining exposure to windstorm losses. Exposure to loss can
include, but is not limited to, net direct premiums and amounts for
which properties are insured.
(4)(7) "First tier coastal county" means:
(A) Aransas County;
(B) Brazoria County;
(C) Calhoun County;
(D) Cameron County;
(E) Chambers County;
(F) Galveston County;
(G) Jefferson County;
(H) Kenedy County;
(I) Kleberg County;
(J) Matagorda County;
(K) Nueces County;
(L) Refugio County;
(M) San Patricio County; or
(N) Willacy County.
(5) Repealed by Acts 2009, 81st Leg., R.S., Ch. 1408,
Sec. 44(1), eff. June 19, 2009.
(6)(8) "Insurance" means Texas windstorm and hail
insurance.
(7)(9) "Net direct premium" means gross direct written
premium less return premium on each canceled contract, regardless
of assumed or ceded reinsurance, that is written on property in this
state, as defined by the board of directors.
(8)(10) "New building code" means a building standard,
specification, or guideline adopted by the commissioner after May
1, 1997, that must be satisfied before new residential construction
qualifies for a certificate of compliance that constitutes evidence
of insurability of the structure by the association.
(9)(11) "Plan of operation" means the plan adopted
under this chapter for the operation of the association.
(10)(12) "Seacoast territory" means the territory of
this state composed of the first tier coastal counties and the
second tier coastal counties.
(11)(13) "Second tier coastal county" means:
(A) Bee County;
(B) Brooks County;
(C) Fort Bend County;
(D) Goliad County;
(E) Hardin County;
(F) Harris County;
(G) Hidalgo County;
(H) Jackson County;
(I) Jim Wells County;
(J) Liberty County;
(K) Live Oak County;
(L) Orange County;
(M) Victoria County; or
(N) Wharton County.
(12) Repealed by Acts 2009, 81st Leg., R.S., Ch. 1408,
Sec. 44(1), eff. June 19, 2009.
(13)(14) "Texas windstorm and hail insurance" means
deductible insurance against:
(A) direct loss to insurable property incurred as
a result of windstorm or hail, as those terms are defined and
limited in policies and forms approved by the department; and
(B) indirect losses resulting from the direct
loss.
SECTION 2. Section 2210.052, Insurance Code, is amended to
read as follows:
Sec. 2210.052. MEMBER PARTICIPATION IN ASSOCIATION. (a)
Each member of the association shall participate in accident year
insured losses and operating expenses of the association, in excess
of premium and other revenue of the association, in the proportion
that the net direct premiums exposure to loss of that member during
the preceding calendar year bears to the aggregate net direct
premiums exposure to loss by all members of the association, as
determined using the information provided under Subsection (b).
(b) The department shall review annual statements, other
reports, and other statistics that the department considers
necessary to obtain the information required under Subsection (a)
and shall provide that information to the association. The
department is entitled to obtain the annual statements, other
reports, and other statistics from any member of the association.
(c) Each member's participation in the association shall be
determined annually in the manner provided by the plan of
operation. For purposes of determining participation in the
association, two or more members that are subject to common
ownership or that operate in this state under common management or
control shall be treated as a single member. The determination
shall also include the net direct premiums exposure to loss of an
affiliate that is under that common management or control,
including an affiliate that is not authorized to engage in the
business of property insurance in this state.
(d) Notwithstanding Subsection (a), a member, in accordance
with the plan of operation, is entitled to receive credit for
similar insurance voluntarily written in areas designated by the
commissioner. The member's participation in the accident year
insured losses and operating expenses of the association in excess
of premium and other revenue of the association shall be reduced in
accordance with the plan of operation.
(e) Notwithstanding Subsections (a)-(d), an insurer that
becomes a member of the association and that has not previously been
a member of the association is not subject to participation in any
insured losses and operating expenses of the association in excess
of premium and other revenue of the association until the second
anniversary of the date on which the insurer first becomes a member
of the association.
SECTION 3. Section 2210.071, Insurance Code, is amended to
read as follows:
Sec. 2210.071. PAYMENT OF EXCESS LOSSES; PAYMENT FROM
RESERVES AND TRUST FUND. (a) If an occurrence or series of
occurrences in an accident year in a catastrophe area results in
insured losses and operating expenses of the association in excess
of premium and other revenue of the association, the excess losses
and operating expenses shall be paid as provided by this
subchapter.
(b) The association shall pay losses in excess of premium
and other revenue of the association from available reserves of the
association and available amounts in the catastrophe reserve trust
fund.
SECTION 4. Section 2210.072, Insurance Code, is amended to
read as follows:
Sec. 2210.072. PAYMENT FROM CLASS 1 PUBLIC SECURITIES;
FINANCIAL INSTRUMENTS. (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 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 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) shall be
issued as necessary in a principal amount not to exceed $1 billion
per accident 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 from association premium revenue.
(d) The association may borrow from, or enter into other
financing arrangements with, any market source, under which the
market source makes interest-bearing loans or other financial
instruments to the association to enable the association to pay
losses under this section or to obtain public securities under this
section. For purposes of this subsection, financial instruments
includes commercial paper.
SECTION 5. Section 2210.073, Insurance Code, is amended to
read as follows:
Sec. 2210.073. PAYMENT FROM CLASS 2 PUBLIC SECURITIES. (a)
Losses not paid under Sections 2210.071 and 2210.072 shall be paid
as provided by this section from proceeds from Class 2 public
securities authorized to be issued in accordance with Subchapter M
on or after the date of any occurrence that results in insured
losses under this subsection. Public securities issued under this
section must be repaid within a period not to exceed 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) may be
issued as necessary in a principal amount not to exceed $1 billion
per accident year. 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 6. Section 2210.074, Insurance Code, is amended to
read as follows:
Sec. 2210.074. PAYMENT THROUGH CLASS 3 PUBLIC SECURITIES.
(a) Losses not paid under Sections 2210.071, 2210.072, and
2210.073 shall be paid as provided by this section from proceeds
from public securities authorized to be issued in accordance with
Subchapter M on or after the date of any occurrence that results in
insured losses under this subsection or through reinsurance as
described by Section 2210.075. Public securities issued under
this section must be repaid within a period not to exceed 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) may be
issued as necessary in a principal amount not to exceed $500 million
per accident year. 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 7. 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 January 1, 2012.