By: Bonnen of Brazoria H.B. No. 3496
A BILL TO BE ENTITLED
AN ACT
relating to the use of assets of the Texas Windstorm Insurance
Association.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Sec. 2210.008. DEPARTMENT ORDERS; GENERAL
RULEMAKING AUTHORITY. (a) The commissioner may issue any orders
that the commissioner considers necessary to implement this chapter
including:
(1) an order enforcing the requirement for the
Association to limit the use of each calendar year's premium and
other revenue to losses, including loss adjustment expenses, and
operating expenses incurred during that calendar year; or
(2) an order requiring the Association to transfer
that calendar year's premium and other revenue in excess of the
calendar year's losses, including loss adjustment expenses, and
operating expenses to the fund established under Sec. 2210.452.
SECTION 2. Sec. 2210.056. USE OF ASSOCIATION ASSETS. (a)
The association's net earnings may not inure, in whole or in part,
to the benefit of a private shareholder or individual.
(b) The increase in the association's assets in any calendar
year may not be used for or diverted to any purpose other than to:
(1) satisfy, in whole or in part, the liability of the
association on claims incurred in that calendar year made on
policies written by the association;
(2) make investments authorized under applicable law;
(3) pay reasonable and necessary administrative
expenses incurred in connection with the operation of the
association and the processing of claims incurred in that calendar
year against the association;
(4) satisfy, in whole or in part, the obligations of
the association incurred in connection with Subchapters B-1, J, and
M, including reinsurance, public securities, and financial
instruments; or
(5) make required remittance under the laws of this
state to be used by this state to:
(A) pay claims made on policies written by the
association;
(B) purchase reinsurance covering losses under
those policies; or
(C) prepare for or mitigate the effects of
catastrophic natural events.
(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 3. Sec. 2210.071. PAYMENT OF EXCESS LOSSES; PAYMENT
FROM RESERVES AND TRUST FUND. (a) If, in a calendar [catastrophe]
year, an occurrence or series of occurrences in a catastrophe area
results in insured losses, including loss adjustment expenses, and
operating expenses of the association in excess of premium and
other revenue of the association, the excess losses, including loss
adjustment expenses, and operating expenses shall be paid as
provided by this subchapter.
(b) The association shall pay losses in excess of that
calendar year's premium and other revenue of the association from
available reserves of the association and available amounts in the
catastrophe reserve trust fund.
(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 and, notwithstanding Subsection (a),
may be paid from the proceeds of public securities issued under
Section 2210.072(a) before an occurrence or series of occurrences
that results in insured losses.
(d) If additional losses, including loss adjustment
expenses, related to prior calendar years are recognized, the
current year's premium and other revenue must not be used to satisfy
the additional losses, including loss adjustment expenses.
SECTION 4. Sec. 2210.152. CONTENTS OF PLAN OF OPERATION.
(a) The plan of operation must:
(1) provide for the efficient, economical, fair, and
nondiscriminatory administration of the association, including
that current calendar year revenue must not be used to pay losses,
including loss adjustment expenses, that were incurred in prior
years; and
(2) include:
(A) a plan for the equitable assessment of the
members of the association to defray losses and expenses;
(B) underwriting standards;
(C) procedures for accepting and ceding
reinsurance;
(D) procedures for obtaining and repaying
amounts under any financial instruments authorized under this
chapter;
(E) procedures for determining the amount of
insurance to be provided to specific risks;
(F) time limits and procedures for processing
applications for insurance; and
(G) other provisions as considered necessary by
the department to implement the purposes of this chapter.
(b) The plan of operation may provide for liability limits
for an insured structure and for the corporeal movable property
located in the structure.
(c) The plan of operation shall require the association to
use the claim settlement guidelines published by the commissioner
under Section 2210.578(f) in evaluating the extent to which a loss
to insured property is incurred as a result of wind, waves, tidal
surges, or rising waters not caused by waves or surges.
SECTION 5. Sec. 2210.452. ESTABLISHMENT AND USE OF TRUST
FUND. (a) The commissioner shall adopt rules under which the
association makes payments to the catastrophe reserve trust fund.
The trust fund may be used only to fund the obligations of the trust
fund under Subchapter B-1.
(b) All money, including investment income, deposited in
the trust fund constitutes state funds until disbursed as provided
by this chapter and commissioner rules. The comptroller shall hold
the money outside the state treasury on behalf of, and with legal
title in, the department. The department shall keep and maintain
the trust fund in accordance with this chapter and commissioner
rules. The comptroller, as custodian of the trust fund, shall
administer the trust fund strictly and solely as provided by this
chapter and commissioner rules.
(c) At the end of each calendar year [or policy year,] the
association shall use the calendar year net gain from operations of
the association, including all premium and other revenue of the
association in excess of [incurred] losses, including loss
adjustment expenses, operating expenses, public security
obligations, and public security administrative expenses incurred
in that calendar year, to make payments to the trust fund, to
procure reinsurance, or to make payments to the trust fund and to
procure reinsurance.
(d) The commissioner by rule shall establish the procedure
relating to the disbursement of money from the trust fund to
policyholders in the event of an occurrence or series of
occurrences within a catastrophe area that results in a
disbursement under Subchapter B-1.
(e) The trust fund may be terminated only by law. On
termination of the trust fund, all assets of the trust fund revert
to the state to provide funding for the mitigation and preparedness
plan established under Section 2210.454.
SECTION 6. 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, 2013.