Texas 2015 - 84th Regular

Texas Senate Bill SB302 Compare Versions

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1	1	By: Hinojosa S.B. No. 302
2	2
3	3
4	4	A BILL TO BE ENTITLED
5	5	AN ACT
6	6	relating to the operation of the Texas Windstorm Insurance
7	7	Association; affecting surcharges.
8	8	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
9	9	SECTION 1. Subchapter A, Chapter 2210, Insurance Code, is
10	10	amended by adding Section 2210.015 to read as follows:
11	11	Sec. 2210.015. STUDY OF MARKET INCENTIVES; BIENNIAL
12	12	REPORTING. (a) Each biennium, the department shall conduct a
13	13	study of market incentives to promote participation in the
14	14	voluntary windstorm and hail insurance market in the seacoast
15	15	territory. The study must address as possible incentives the
16	16	mandatory or voluntary issuance of windstorm and hail insurance in
17	17	conjunction with the issuance of a homeowners policy or other
18	18	residential property insurance policy in the seacoast territory.
19	19	(b) The department shall include the results of the study
20	20	conducted under this section in the report submitted under Section
21	21	32.022.
22	22	SECTION 2. Subchapter B-1, Chapter 2210, Insurance Code, is
23	23	amended by amending Section 2210.071 and adding Sections 2210.0715
24	24	and 2210.0716 to read as follows:
25	25	Sec. 2210.071. PAYMENT OF EXCESS LOSSES[; PAYMENT FROM
26	26	RESERVES AND TRUST FUND]. [(a)] If, in a catastrophe year, an
27	27	occurrence or series of occurrences in a catastrophe area results
28	28	in insured losses and operating expenses of the association in
29	29	excess of premium and other revenue of the association, the excess
30	30	losses and operating expenses shall be paid as provided by this
31	31	subchapter.
32	32	Sec. 2210.0715. PAYMENT FROM RESERVES AND TRUST FUND.
33	33	[(b)] The association shall pay losses in excess of premium and
34	34	other revenue of the association from available reserves of the
35	35	association and available amounts in the catastrophe reserve trust
36	36	fund.
37	37	[(c) Losses not paid under Subsection (b) shall be paid from
38	38	the proceeds from public securities issued in accordance with this
39	39	subchapter and Subchapter M and, notwithstanding Subsection (a),
40	40	may be paid from the proceeds of public securities issued under
41	41	Section 2210.072(a) before an occurrence or series of occurrences
42	42	that results in insured losses.]
43	43	Sec. 2210.0716. PAYMENT FROM CLASS 1 ASSESSMENTS.
44	44	(a) Losses in a catastrophe year not paid under Section 2210.0715
45	45	shall be paid as provided by this section from Class 1 member
46	46	assessments not to exceed $500 million for that catastrophe year.
47	47	(b) The association, with the approval of the commissioner,
48	48	shall notify each member of the amount of the member's assessment
49	49	under this section. The proportion of the losses allocable to each
50	50	insurer under this section shall be determined in the manner used to
51	51	determine each insurer's participation in the association for the
52	52	year under Section 2210.052.
53	53	SECTION 3. Sections 2210.072(a), (b), (b-1), (c), and (f),
54	54	Insurance Code, are amended to read as follows:
55	55	(a) Losses not paid under Sections 2210.0715 and 2210.0716
56	56	[Section 2210.071(b)] shall be paid as provided by this section
57	57	from the proceeds from Class 1 public securities authorized to be
58	58	issued in accordance with Subchapter M before, on, or after the date
59	59	of any occurrence or series of occurrences that results in insured
60	60	losses. Public securities issued under this section must be paid
61	61	[repaid] within a period not to exceed 10 [14] years[,] and may be
62	62	paid [repaid] sooner if the board of directors elects to do so and
63	63	the commissioner approves, except that early payment may not result
64	64	in an increase to any assessment or premium surcharge imposed under
65	65	this chapter.
66	66	(b) Public securities described by Subsection (a) that are
67	67	issued before an occurrence or series of occurrences that results
68	68	in incurred losses:
69	69	(1) may be issued on the request of the board of
70	70	directors with the approval of the commissioner; and
71	71	(2) may not, in the aggregate, exceed $500 million [$1
72	72	billion] at any one time, regardless of the calendar year or years
73	73	in which the outstanding public securities were issued.
74	74	(b-1) Public securities described by Subsection (a):
75	75	(1) shall be issued as necessary in a principal amount
76	76	not to exceed $500 million [$1 billion] per catastrophe year, in the
77	77	aggregate, for securities issued during that catastrophe year
78	78	before the occurrence or series of occurrences that results in
79	79	incurred losses in that year and securities issued on or after the
80	80	date of that occurrence or series of occurrences, and regardless of
81	81	whether for a single occurrence or a series of occurrences; and
82	82	(2) subject to the [$1 billion] maximum described by
83	83	Subdivision (1), may be issued, in one or more issuances or
84	84	tranches, during the calendar year in which the occurrence or
85	85	series of occurrences occurs or, if the public securities cannot
86	86	reasonably be issued in that year, during the following calendar
87	87	year.
88	88	(c) If public securities are issued as described by this
89	89	section, the public securities shall be paid [repaid] in the manner
90	90	prescribed by Subchapter M [from association premium revenue].
91	91	(f) If, under Subsection (e), the proceeds of any
92	92	outstanding public securities issued during a previous catastrophe
93	93	year must be depleted, those proceeds shall count against the $500
94	94	million [$1 billion] limit on public securities described by this
95	95	section in the catastrophe year in which the proceeds must be
96	96	depleted.
97	97	SECTION 4. Subchapter B-1, Chapter 2210, Insurance Code, is
98	98	amended by adding Section 2210.0725 to read as follows:
99	99	Sec. 2210.0725. PAYMENT FROM CLASS 2 ASSESSMENTS.
100	100	(a) Losses in a catastrophe year not paid under Sections
101	101	2210.0715, 2210.0716, and 2210.072 shall be paid as provided by
102	102	this section from Class 2 member assessments not to exceed $500
103	103	million for that catastrophe year.
104	104	(b) The association, with the approval of the commissioner,
105	105	shall notify each member of the amount of the member's assessment
106	106	under this section. The proportion of the losses allocable to each
107	107	insurer under this section shall be determined in the manner used to
108	108	determine each insurer's participation in the association for the
109	109	year under Section 2210.052.
110	110	SECTION 5. Sections 2210.073 and 2210.074, Insurance Code,
111	111	are amended to read as follows:
112	112	Sec. 2210.073. PAYMENT FROM CLASS 2 PUBLIC SECURITIES.
113	113	(a) Losses not paid under Sections 2210.0715, 2210.0716,
114	114	[2210.071 and] 2210.072, and 2210.0725 shall be paid as provided by
115	115	this section from the proceeds from Class 2 public securities
116	116	authorized to be issued in accordance with Subchapter M on or after
117	117	the date of any occurrence or series of occurrences that results in
118	118	insured losses [under this subsection]. Public securities issued
119	119	under this section must be paid [repaid] within a period not to
120	120	exceed 10 years[,] and may be paid [repaid] sooner if the board of
121	121	directors elects to do so and the commissioner approves, except
122	122	that early payment may not result in an increase to any assessment
123	123	or premium surcharge imposed under this chapter.
124	124	(b) Public securities described by Subsection (a):
125	125	(1) shall [may] be issued as necessary in a principal
126	126	amount not to exceed $500 million [$1 billion] per catastrophe
127	127	year, in the aggregate, whether for a single occurrence or a series
128	128	of occurrences; and
129	129	(2) subject to the [$1 billion] maximum described by
130	130	Subdivision (1), may be issued, in one or more issuances or
131	131	tranches, during the calendar year in which the occurrence or
132	132	series of occurrences occurs or, if the public securities cannot
133	133	reasonably be issued in that year, during the following calendar
134	134	year.
135	135	(c) If the losses are paid with public securities described
136	136	by this section, the public securities shall be paid [repaid] in the
137	137	manner prescribed by Subchapter M.
138	138	Sec. 2210.074. PAYMENT FROM [THROUGH] CLASS 3 PUBLIC
139	139	SECURITIES. (a) Losses not paid under Sections 2210.0715,
140	140	2210.0716, [2210.071,] 2210.072, 2210.0725, and 2210.073 shall be
141	141	paid as provided by this section from the proceeds from Class 3
142	142	public securities authorized to be issued in accordance with
143	143	Subchapter M on or after the date of any occurrence or series of
144	144	occurrences that results in insured losses [under this subsection
145	145	or through reinsurance as described by Section 2210.075]. Public
146	146	securities issued under this section must be paid [repaid] within a
147	147	period not to exceed 10 years[,] and may be paid [repaid] sooner if
148	148	the board of directors elects to do so and the commissioner
149	149	approves, except that early payment may not result in an increase to
150	150	any assessment or premium surcharge imposed under this chapter.
151	151	(b) Public securities described by Subsection (a):
152	152	(1) shall [may] be issued as necessary in a principal
153	153	amount not to exceed $1 billion [$500 million] per catastrophe
154	154	year, in the aggregate, whether for a single occurrence or a series
155	155	of occurrences; and
156	156	(2) subject to the [$500 million] maximum described by
157	157	Subdivision (1), may be issued, in one or more issuances or
158	158	tranches, during the calendar year in which the occurrence or
159	159	series of occurrences occurs or, if the public securities cannot
160	160	reasonably be issued in that year, during the following calendar
161	161	year.
162	162	(c) If the losses are paid with public securities described
163	163	by this section, the public securities shall be paid [repaid] in the
164	164	manner prescribed by Subchapter M [through member assessments as
165	165	provided by this section. The association shall notify each member
166	166	of the association of the amount of the member's assessment under
167	167	this section. The proportion of the losses allocable to each
168	168	insurer under this section shall be determined in the manner used to
169	169	determine each insurer's participation in the association for the
170	170	year under Section 2210.052. A member of the association may not
171	171	recoup an assessment paid under this subsection through a premium
172	172	surcharge or tax credit].
173	173	SECTION 6. Section 2210.102, Insurance Code, is amended by
174	174	amending Subsections (a), (b), (c), (d), (e), and (f) and adding
175	175	Subsections (c-1), (d-1), and (d-2) to read as follows:
176	176	(a) The board of directors is composed of nine members
177	177	appointed by the governor [commissioner] in accordance with this
178	178	section.
179	179	(b) Three [Four] members must be representatives of the
180	180	insurance industry who actively write and renew windstorm and hail
181	181	insurance in the seacoast territory.
182	182	(c) Three [Four] members must, as of the date of the
183	183	appointment, reside in the first tier coastal counties. Each of
184	184	the following regions must be represented by a member residing in
185	185	the region and [At least one of the members] appointed under this
186	186	subsection:
187	187	(1) the region consisting of Cameron, Kenedy, Kleberg,
188	188	and Willacy Counties;
189	189	(2) the region consisting of Aransas, Calhoun, Nueces,
190	190	Refugio, and San Patricio Counties; and
191	191	(3) the region consisting of Brazoria, Chambers,
192	192	Galveston, Jefferson, and Matagorda Counties and any part of Harris
193	193	County designated as a catastrophe area under Section 2210.005.
194	194	(c-1) One of the members appointed under Subsection (c) must
195	195	be a property and casualty agent who is licensed under this code and
196	196	is not a captive agent.
197	197	(d) One member must be a representative of an area of this
198	198	state that is not located in the seacoast territory [with
199	199	demonstrated expertise in insurance and actuarial principles].
200	200	(d-1) One member must be an engineer who:
201	201	(1) is knowledgeable of, and has professional
202	202	expertise in, wind-related design and construction practices in
203	203	coastal areas that are subject to high winds and hurricanes; and
204	204	(2) resides in a second tier coastal county.
205	205	(d-2) One member must be a representative of the financial
206	206	industry who resides in a second tier coastal county.
207	207	(e) All members must have demonstrated experience in
208	208	insurance, general business, or actuarial principles and the
209	209	member's area of expertise, if any, sufficient to make the success
210	210	of the association probable.
211	211	(f) Insurers who are members of the association shall
212	212	nominate, from among those members, persons to fill any vacancy in
213	213	the three [four] board of director seats reserved for
214	214	representatives of the insurance industry. The board of directors
215	215	shall solicit nominations from the members and submit the
216	216	nominations to the governor [commissioner]. The nominee slate
217	217	submitted to the governor [commissioner] under this subsection must
218	218	include at least three more names than the number of vacancies. The
219	219	governor may [commissioner shall] appoint replacement insurance
220	220	industry representatives from the nominee slate.
221	221	SECTION 7. Section 2210.103(c), Insurance Code, is amended
222	222	to read as follows:
223	223	(c) A member of the board of directors may be removed by the
224	224	governor [commissioner] with cause stated in writing and posted on
225	225	the association's website. The governor [commissioner] shall
226	226	appoint a replacement in accordance with [the manner provided by]
227	227	Section 2210.102 for a member who leaves or is removed from the
228	228	board of directors.
229	229	SECTION 8. Subchapter E, Chapter 2210, Insurance Code, is
230	230	amended by adding Sections 2210.2022 and 2210.211 to read as
231	231	follows:
232	232	Sec. 2210.2022. INFORMATION REQUIRED FOR CERTAIN
233	233	APPLICATIONS. (a) An applicant for new or renewal association
234	234	coverage to take effect on or after January 1, 2016, must include in
235	235	the application the information described by Subsection (b) if the
236	236	applicant has coverage against loss incurred to real or tangible
237	237	personal property at the fixed location for which association
238	238	coverage is sought that is provided under a residential property
239	239	insurance policy, including a residential fire and allied lines
240	240	insurance policy, a farm and ranch owners insurance policy, a
241	241	condominium owners policy, or a tenants policy.
242	242	(b) The applicant must include in the application the
243	243	following information for each policy providing coverage described
244	244	by Subsection (a):
245	245	(1) the total premium for the policy, including a
246	246	policy number for coverage issued by the FAIR Plan Association
247	247	under Chapter 2211, if applicable, and:
248	248	(A) the amount of insurance under the policy on
249	249	the dwelling and contents; or
250	250	(B) if the policy is a tenants policy or
251	251	condominium owners policy, the insured amount for the contents
252	252	coverage; and
253	253	(2) the deductibles applicable for the policy.
254	254	Sec. 2210.211. CONFIDENTIAL INFORMATION. (a) Except as
255	255	provided by Subsection (b), all information collected and used
256	256	under Section 2210.2022 is confidential information not subject to
257	257	disclosure under Chapter 552, Government Code.
258	258	(b) Information described by Subsection (a) may be used for
259	259	the purposes and in the manner described by this chapter.
260	260	SECTION 9. The heading to Subchapter J, Chapter 2210,
261	261	Insurance Code, is amended to read as follows:
262	262	SUBCHAPTER J. CATASTROPHE RESERVE TRUST FUND; [AND] REINSURANCE
263	263	AND ALTERNATIVE RISK FINANCING [PROGRAM]
264	264	SECTION 10. Section 2210.451, Insurance Code, is amended to
265	265	read as follows:
266	266	Sec. 2210.451. DEFINITION. Except to the extent that
267	267	context clearly requires otherwise, in [In] this subchapter, "trust
268	268	fund" means the catastrophe reserve trust fund.
269	269	SECTION 11. Section 2210.452, Insurance Code, is amended by
270	270	amending Subsections (a), (c), and (d) and adding Subsection (f) to
271	271	read as follows:
272	272	(a) The commissioner shall adopt rules under which the
273	273	association makes payments to the catastrophe reserve trust fund.
274	274	Except as otherwise specifically provided by this section, the
275	275	[The] trust fund may be used only for purposes directly related to
276	276	funding the payment of insured losses, including:
277	277	(1) funding [to fund] the obligations of the trust
278	278	fund under Subchapter B-1; and
279	279	(2) purchasing reinsurance or using alternative risk
280	280	financing mechanisms under Sections 2210.453 and 2210.4531.
281	281	(c) At the end of each calendar year or policy year, the
282	282	association shall use the net gain from operations of the
283	283	association, including all premium and other revenue of the
284	284	association in excess of incurred losses, operating expenses,
285	285	deposits to the fund established under Section 2210.4521, public
286	286	security obligations, and public security administrative expenses,
287	287	to make payments to the trust fund, to procure reinsurance, or to
288	288	make payments to the trust fund and [to] procure reinsurance.
289	289	(d) The commissioner by rule shall establish the procedure
290	290	relating to the disbursement of money from the trust fund to
291	291	policyholders and for association administrative expenses directly
292	292	related to funding the payment of insured losses in the event of an
293	293	occurrence or series of occurrences within a catastrophe area that
294	294	results in a disbursement under Subchapter B-1.
295	295	(f) The commissioner by rule shall establish the procedure
296	296	relating to the disbursement of money from the trust fund to pay for
297	297	operating expenses, including reinsurance or alternative risk
298	298	financing mechanisms under Sections 2210.453 and 2210.4531, if the
299	299	association does not have sufficient premium and other revenue.
300	300	SECTION 12. Subchapter J, Chapter 2210, Insurance Code, is
301	301	amended by adding Section 2210.4521 to read as follows:
302	302	Sec. 2210.4521. DEDICATED DISTRIBUTIONS TO CATASTROPHE
303	303	RESERVE TRUST FUND. (a) Notwithstanding any other provision in
304	304	this chapter, as provided for in the plan of operation, the
305	305	association shall deposit monthly in a fund, separate from the
306	306	catastrophe reserve trust fund established under Section 2210.452,
307	307	an amount sufficient to accumulate on an annual calendar year basis
308	308	an amount equal to 30 percent of the association's earned premium
309	309	for the preceding calendar year.
310	310	(b) The fund described by Subsection (a) is a trust fund
311	311	with the Texas Treasury Safekeeping Trust Company to be held
312	312	outside the state treasury.
313	313	(c) Not later than February 1 of each year the association
314	314	shall direct the Texas Treasury Safekeeping Trust Company to
315	315	deposit all amounts deposited in the fund described by Subsection
316	316	(a) during the preceding calendar year, and interest earned on
317	317	those amounts, into the catastrophe reserve trust fund.
318	318	(d) Money deposited in the fund described by Subsection (a)
319	319	is irrevocably pledged to be distributed to the catastrophe reserve
320	320	trust fund as provided in this section and is exempt from any other
321	321	claim or attachment under law.
322	322	(e) Money deposited under this section may be invested by
323	323	the Texas Treasury Safekeeping Trust Company as permitted by
324	324	general law.
325	325	SECTION 13. Section 2210.453, Insurance Code, is amended to
326	326	read as follows:
327	327	Sec. 2210.453. REINSURANCE AND ALTERNATIVE RISK FINANCING.
328	328	(a) The association may[:
329	329	[(1) make payments into the trust fund; and
330	330	[(2)] purchase reinsurance or use alternative risk
331	331	financing mechanisms in an aggregate amount not greater than $1
332	332	billion.
333	333	(b) The [association may purchase] reinsurance purchased or
334	334	alternative risk financing mechanisms used under this section
335	335	operate [that operates] in addition to [or in concert with the trust
336	336	fund,] public securities, other approved financial instruments,
337	337	and assessments authorized by this chapter.
338	338	(c) The attachment point for reinsurance purchased under
339	339	this section may not be less than the aggregate amount of all
340	340	funding available to the association under Subchapter B-1. [If the
341	341	association does not purchase reinsurance as authorized by this
342	342	section, the board, not later than June 1 of each year, shall submit
343	343	to the commissioner, the legislative oversight board established
344	344	under Subchapter N, the governor, the lieutenant governor, and the
345	345	speaker of the house of representatives a report containing an
346	346	actuarial plan for paying losses in the event of a catastrophe with
347	347	estimated damages of $2.5 billion or more. The report required by
348	348	this subsection must:
349	349	[(1) document and denominate the association's
350	350	resources available to pay claims, including cash or other highly
351	351	liquid assets, assessments that the association is projected to
352	352	impose, pre-event and post-event bonding capacity, and
353	353	private-sector recognized risk-transfer mechanisms, including
354	354	catastrophe bonds and reinsurance;
355	355	[(2) include an independent, third-party appraisal of
356	356	the likelihood of an assessment, the maximum potential size of the
357	357	assessment, and an estimate of the probability that the assessment
358	358	would not be adequate to meet the association's needs; and
359	359	[(3) include an analysis of financing alternatives to
360	360	assessments that includes the costs of borrowing and the
361	361	consequences that additional purchase of reinsurance, catastrophe
362	362	bonds, or other private-sector recognized risk-transfer
363	363	instruments would have in reducing the size or potential of
364	364	assessments.
365	365	[(d) A person who prepares a report required by Subsection
366	366	(c) may not contract to provide any other service to the
367	367	association, except for the preparation of similar reports, before
368	368	the third anniversary of the date the last report prepared by the
369	369	person under that subsection is submitted.
370	370	[(e) The report submitted under this section is for
371	371	informational purposes only and does not bind the association to a
372	372	particular course of action.]
373	373	SECTION 14. Subchapter J, Chapter 2210, Insurance Code, is
374	374	amended by adding Section 2210.4531 to read as follows:
375	375	Sec. 2210.4531. ADDITIONAL REINSURANCE. (a) The
376	376	association may purchase, in addition to any reinsurance purchased
377	377	or alternative risk financing mechanism used under Section
378	378	2210.453, reinsurance in an amount not greater than the lesser of:
379	379	(1) $800 million; or
380	380	(2) an amount such that the association's total loss
381	381	funding is sufficient to fund its probable maximum loss for a
382	382	catastrophe year with a probability of one in 100.
383	383	(b) The attachment point for reinsurance purchased under
384	384	this section may not be less than the aggregate amount of all
385	385	funding available to the association under Subchapter B-1 and
386	386	Section 2210.453.
387	387	(c) The association shall assess member insurers the cost of
388	388	reinsurance purchased under this section. The proportion of the
389	389	reinsurance cost allocable to each insurer under this section shall
390	390	be determined in the manner used to determine each insurer's
391	391	participation in the association for the year under Section
392	392	2210.052.
393	393	SECTION 15. Section 2210.455(b), Insurance Code, is amended
394	394	to read as follows:
395	395	(b) The catastrophe plan must:
396	396	(1) describe the manner in which the association will,
397	397	during the period covered by the plan, evaluate losses and process
398	398	claims after the following windstorms affecting an area of maximum
399	399	exposure to the association:
400	400	(A) a windstorm with a four percent chance of
401	401	occurring during the period covered by the plan;
402	402	(B) a windstorm with a two percent chance of
403	403	occurring during the period covered by the plan; and
404	404	(C) a windstorm with a one percent chance of
405	405	occurring during the period covered by the plan; and
406	406	(2) include, if the association does not purchase
407	407	reinsurance or use an alternative risk financing mechanism under
408	408	this subchapter [Section 2210.453] for the period covered by the
409	409	plan, an actuarial plan for paying losses in the event of a
410	410	catastrophe with estimated damages equal to or greater than the
411	411	total amount of potential funding available through assessments and
412	412	public securities under Subchapter B-1 [of $2.5 billion or more].
413	413	SECTION 16. Subchapter L-1, Chapter 2210, Insurance Code,
414	414	is amended by adding Section 2210.5725 to read as follows:
415	415	Sec. 2210.5725. ADJUSTMENT OF CLAIMS BY PRIMARY INSURER.
416	416	An insurer that has primary coverage on property for loss by fire
417	417	must adjust all claims made on an association policy covering the
418	418	same property.
419	419	SECTION 17. Section 2210.602, Insurance Code, is amended by
420	420	adding Subdivisions (2-a), (3-a), and (4-a) to read as follows:
421	421	(2-a) "Class 1 public security trust fund" means the
422	422	dedicated trust fund established by the board and held by the Texas
423	423	Treasury Safekeeping Trust Company into which premium surcharges
424	424	collected under Section 2210.612 for the purpose of repaying Class
425	425	1 public securities are deposited.
426	426	(3-a) "Class 2 public security trust fund" means the
427	427	dedicated trust fund established by the board and held by the Texas
428	428	Treasury Safekeeping Trust Company into which premium surcharges
429	429	collected under Section 2210.613 for the purpose of repaying Class
430	430	2 public securities are deposited.
431	431	(4-a) "Class 3 public security trust fund" means the
432	432	dedicated trust fund established by the board and held by the Texas
433	433	Treasury Safekeeping Trust Company into which premium surcharges
434	434	collected under Section 2210.6135 for the purpose of repaying Class
435	435	3 public securities are deposited.
436	436	SECTION 18. Section 2210.609, Insurance Code, is amended to
437	437	read as follows:
438	438	Sec. 2210.609. REPAYMENT OF ASSOCIATION'S PUBLIC SECURITY
439	439	OBLIGATIONS. (a) The board and the association shall enter into
440	440	an agreement under which the association shall provide for the
441	441	payment of all public security obligations from available funds
442	442	collected by the association and deposited as required by this
443	443	subchapter [into the public security obligation revenue fund]. If
444	444	the association determines that it is unable to pay the public
445	445	security obligations and public security administrative expenses,
446	446	if any, with available funds, the association shall pay those
447	447	obligations and expenses in accordance with Sections 2210.612,
448	448	2210.613, and 2210.6135, [and 2210.6136] as applicable. Class 1,
449	449	Class 2, or Class 3 public securities may be issued on a parity or
450	450	subordinate lien basis with other Class 1, Class 2, or Class 3
451	451	public securities, respectively.
452	452	(b) If any public securities issued under this chapter are
453	453	outstanding, the authority shall notify the association of the
454	454	amount of the public security obligations and the estimated amount
455	455	of public security administrative expenses, if any, each calendar
456	456	year in a period sufficient, as determined by the association, to
457	457	permit the association to determine the availability of funds[,
458	458	assess members of the association under Sections 2210.613 and
459	459	2210.6135,] and assess a premium surcharge if necessary.
460	460	(c) The association shall deposit all revenue collected
461	461	under Section 2210.612 in the Class 1 public security trust fund
462	462	[public security obligation revenue fund], all revenue collected
463	463	under Section 2210.613 [2210.613(b)] in the Class 2 public security
464	464	[premium surcharge] trust fund, and all revenue collected under
465	465	Section [Sections 2210.613(a) and] 2210.6135 in the Class 3 public
466	466	security [member assessment] trust fund. Money deposited in a fund
467	467	may be invested as permitted by general law. Money in a fund
468	468	required to be used to pay public security obligations and public
469	469	security administrative expenses, if any, shall be transferred to
470	470	the appropriate funds in the manner and at the time specified in the
471	471	proceedings authorizing the public securities to ensure timely
472	472	payment of obligations and expenses. This may include the board
473	473	establishing funds and accounts with the comptroller that the board
474	474	determines are necessary to administer and repay the public
475	475	security obligations. If the association has not transferred
476	476	amounts sufficient to pay the public security obligations to the
477	477	board's designated interest and sinking fund in a timely manner,
478	478	the board may direct the Texas Treasury Safekeeping Trust Company
479	479	to transfer from the Class 1 public security [public security
480	480	obligation revenue fund, the premium surcharge] trust fund, [or]
481	481	the Class 2 public security trust fund, or the Class 3 public
482	482	security [member assessment] trust fund to the appropriate account
483	483	the amount necessary to pay the public security obligation.
484	484	(d) The association shall provide for the payment of the
485	485	public security obligations and the public security administrative
486	486	expenses by irrevocably pledging revenues received from premiums,
487	487	[member assessments,] premium surcharges, and amounts on deposit in
488	488	the Class 1 public security [public security obligation revenue
489	489	fund, the premium surcharge] trust fund, [and] the Class 2 public
490	490	security trust fund, and the Class 3 public security [member
491	491	assessment] trust fund, together with any public security reserve
492	492	fund, as provided in the proceedings authorizing the public
493	493	securities and related credit agreements.
494	494	(e) An amount owed by the board under a credit agreement
495	495	shall be payable from and secured by a pledge of revenues received
496	496	by the association [or amounts from the public security obligation
497	497	trust fund], the Class 1 public security [premium surcharge] trust
498	498	fund, [and] the Class 2 public security [member assessment] trust
499	499	fund, and the Class 3 public security trust fund, to the extent
500	500	provided in the proceedings authorizing the credit agreement.
501	501	SECTION 19. Section 2210.610(a), Insurance Code, is amended
502	502	to read as follows:
503	503	(a) Revenues received from the premium surcharges under
504	504	Sections 2210.612, [Section] 2210.613, and [member assessments
505	505	under Sections 2210.613 and] 2210.6135 may be applied only as
506	506	provided by this subchapter.
507	507	SECTION 20. Section 2210.611, Insurance Code, is amended to
508	508	read as follows:
509	509	Sec. 2210.611. EXCESS REVENUE COLLECTIONS AND INVESTMENT
510	510	EARNINGS. Revenue collected in any calendar year from a premium
511	511	surcharge under Sections 2210.612, [Section] 2210.613, and [member
512	512	assessments under Sections 2210.613 and] 2210.6135 that exceeds the
513	513	amount of the public security obligations and public security
514	514	administrative expenses payable in that calendar year and interest
515	515	earned on the funds [public security obligation fund] may, in the
516	516	discretion of the association, be:
517	517	(1) used to pay public security obligations payable in
518	518	the subsequent calendar year, offsetting the amount of the premium
519	519	surcharge [and member assessments, as applicable,] that would
520	520	otherwise be required to be levied for the year under this
521	521	subchapter;
522	522	(2) used to redeem or purchase outstanding public
523	523	securities; or
524	524	(3) deposited in the catastrophe reserve trust fund.
525	525	SECTION 21. Section 2210.612, Insurance Code, is amended to
526	526	read as follows:
527	527	Sec. 2210.612. PAYMENT OF CLASS 1 PUBLIC SECURITIES.
528	528	(a) The association shall pay Class 1 public securities issued
529	529	under Section 2210.072 from:
530	530	(1) [its] net premium and other revenue; and
531	531	(2) if net premium and other revenue are not
532	532	sufficient to pay the securities, a catastrophe area premium
533	533	surcharge collected in accordance with this section.
534	534	(b) On approval by the commissioner, the association and
535	535	each insurer that provides insurance in a catastrophe area shall
536	536	assess, as provided by this section, a premium surcharge to each
537	537	policyholder of a policy described by Subsection (c). The premium
538	538	surcharge must be set in an amount sufficient to pay, for the
539	539	duration of the issued public securities, all debt service not
540	540	already covered by available funds and all related expenses on the
541	541	public securities.
542	542	(c) The premium surcharge under this section shall be
543	543	assessed on all policyholders of policies that cover insured
544	544	property that is located in a catastrophe area, including
545	545	automobiles principally garaged in a catastrophe area. The premium
546	546	surcharge shall be assessed on each Texas windstorm and hail
547	547	insurance policy and each property and casualty insurance policy,
548	548	including an automobile insurance policy, issued for automobiles
549	549	and other property located in the catastrophe area. The premium
550	550	surcharge applies to:
551	551	(1) all policies written under the following lines of
552	552	insurance:
553	553	(A) fire and allied lines;
554	554	(B) farm and ranch owners;
555	555	(C) residential property insurance;
556	556	(D) private passenger automobile liability and
557	557	physical damage insurance; and
558	558	(E) commercial automobile liability and physical
559	559	damage insurance; and
560	560	(2) the property insurance portion of a commercial
561	561	multiple peril insurance policy.
562	562	(d) A premium surcharge under this section is a separate
563	563	charge in addition to the premiums collected and is not subject to
564	564	premium tax or commissions. Failure by a policyholder to pay the
565	565	surcharge constitutes failure to pay premium for purposes of policy
566	566	cancellation.
567	567	(e) [(b)] The association may enter financing arrangements
568	568	as described by Section 2210.072(d) as necessary to obtain public
569	569	securities issued under Section 2210.072. Nothing in this
570	570	subsection shall prevent the authorization and creation of one or
571	571	more programs for the issuance of commercial paper before the date
572	572	of an occurrence or series of occurrences that results in insured
573	573	losses under Section 2210.072(a).
574	574	SECTION 22. Section 2210.613, Insurance Code, is amended to
575	575	read as follows:
576	576	Sec. 2210.613. PAYMENT OF CLASS 2 PUBLIC SECURITIES.
577	577	(a) The association shall pay Class 2 public securities issued
578	578	under Section 2210.073 from:
579	579	(1) net premium and other revenue; and
580	580	(2) if net premium and other revenue are not
581	581	sufficient to pay the securities, a catastrophe area premium
582	582	surcharge collected in accordance with this section.
583	583	(b) On approval by the commissioner, the association and
584	584	each insurer that provides insurance in a catastrophe area shall
585	585	assess, as provided by this section, a premium surcharge to each
586	586	policyholder of a policy described by Subsection (c). The premium
587	587	surcharge must be set in an amount sufficient to pay, for the
588	588	duration of the issued public securities, all debt service not
589	589	already covered by available funds and all related expenses on the
590	590	public securities [as provided by this section. Thirty percent of
591	591	the cost of the public securities shall be paid through member
592	592	assessments as provided by this section. The association shall
593	593	notify each member of the association of the amount of the member's
594	594	assessment under this section. The proportion of the losses
595	595	allocable to each insurer under this section shall be determined in
596	596	the manner used to determine each insurer's participation in the
597	597	association for the year under Section 2210.052. A member of the
598	598	association may not recoup an assessment paid under this subsection
599	599	through a premium surcharge or tax credit].
600	600	[(b) Seventy percent of the cost of the public securities
601	601	shall be paid by a premium surcharge collected under this section in
602	602	an amount set by the commissioner. On approval by the commissioner,
603	603	each insurer, the association, and the Texas FAIR Plan Association
604	604	shall assess, as provided by this section, a premium surcharge to
605	605	each policyholder of a policy that is in effect on or after the
606	606	180th day after the date the commissioner issues notice of the
607	607	approval of the public securities. The premium surcharge must be
608	608	set in an amount sufficient to pay, for the duration of the issued
609	609	public securities, all debt service not already covered by
610	610	available funds or member assessments and all related expenses on
611	611	the public securities.]
612	612	(c) The premium surcharge under this section [Subsection
613	613	(b)] shall be assessed on all policyholders of policies that cover
614	614	insured property that is located in a catastrophe area, including
615	615	automobiles principally garaged in a catastrophe area. The premium
616	616	surcharge shall be assessed on each Texas windstorm and hail
617	617	insurance policy and each property and casualty insurance policy,
618	618	including an automobile insurance policy, issued for automobiles
619	619	and other property located in the catastrophe area. The [A] premium
620	620	surcharge [under Subsection (b)] applies to:
621	621	(1) all policies written under the following lines of
622	622	insurance:
623	623	(A) fire and allied lines;
624	624	(B) farm and ranch owners;
625	625	(C) residential property insurance;
626	626	(D) private passenger automobile liability and
627	627	physical damage insurance; and
628	628	(E) commercial automobile liability and physical
629	629	damage insurance; and
630	630	(2) the property insurance portion of a commercial
631	631	multiple peril insurance policy.
632	632	(d) A premium surcharge under this section [Subsection (b)]
633	633	is a separate charge in addition to the premiums collected and is
634	634	not subject to premium tax or commissions. Failure by a
635	635	policyholder to pay the surcharge constitutes failure to pay
636	636	premium for purposes of policy cancellation.
637	637	SECTION 23. Section 2210.6135, Insurance Code, is amended
638	638	to read as follows:
639	639	Sec. 2210.6135. PAYMENT OF CLASS 3 PUBLIC SECURITIES.
640	640	(a) The association shall pay Class 3 public securities issued
641	641	under Section 2210.074 from:
642	642	(1) net premium and other revenue; and
643	643	(2) if net premium and other revenue are not
644	644	sufficient to pay the securities, a statewide premium surcharge
645	645	collected in accordance with this section.
646	646	(b) On approval of the commissioner, the association and
647	647	each insurer that provides insurance in this state shall assess, as
648	648	provided by this section, a premium surcharge to each policyholder
649	649	of a policy described by Subsection (d). Except as provided by
650	650	Subsection (c), the premium surcharge must be set in an amount
651	651	sufficient to pay, for the duration of the issued public
652	652	securities, all debt service not already covered by available funds
653	653	and all related expenses on the public securities.
654	654	(c) The amount of the surcharge assessed under Subsection
655	655	(b) may not exceed one percent of the premium charged for the
656	656	policyholder's policy described by Subsection (d).
657	657	(d) The premium surcharge under this section shall be
658	658	assessed on all policyholders of policies that cover insured
659	659	property located in this state, including automobiles principally
660	660	garaged in this state, written under the following lines of
661	661	insurance:
662	662	(1) fire and allied lines;
663	663	(2) farm and ranch owners;
664	664	(3) residential property insurance; and
665	665	(4) private passenger automobile liability and
666	666	physical damage insurance.
667	667	(e) A premium surcharge under this section is a separate
668	668	charge in addition to the premiums collected and is not subject to
669	669	premium tax or commissions. Failure by a policyholder to pay the
670	670	surcharge constitutes failure to pay premium for purposes of policy
671	671	cancellation [as provided by this section through member
672	672	assessments]. [The association, for the payment of the losses,
673	673	shall assess the members of the association a principal amount not
674	674	to exceed $500 million per catastrophe year. The association shall
675	675	notify each member of the association of the amount of the member's
676	676	assessment under this section.
677	677	[(b) The proportion of the losses allocable to each insurer
678	678	under this section shall be determined in the manner used to
679	679	determine each insurer's participation in the association for the
680	680	year under Section 2210.052.
681	681	[(c) A member of the association may not recoup an
682	682	assessment paid under this section through a premium surcharge or
683	683	tax credit.]
684	684	SECTION 24. Section 2210.616(a), Insurance Code, is amended
685	685	to read as follows:
686	686	(a) The state pledges for the benefit and protection of
687	687	financing parties, the board, and the association that the state
688	688	will not take or permit any action that would:
689	689	(1) impair the collection of [member assessments and]
690	690	premium surcharges or the deposit of those funds into the Class 1
691	691	public security [member assessment] trust fund, Class 2 public
692	692	security [or premium surcharge] trust fund, or Class 3 public
693	693	security trust fund;
694	694	(2) reduce, alter, or impair the [member assessments
695	695	or] premium surcharges to be imposed, collected, and remitted to
696	696	financing parties until the principal, interest, and premium, and
697	697	any other charges incurred and contracts to be performed in
698	698	connection with the related public securities, have been paid and
699	699	performed in full; or
700	700	(3) in any way impair the rights and remedies of the
701	701	public security owners until the public securities are fully
702	702	discharged.
703	703	SECTION 25. Section 2210.6165, Insurance Code, is amended
704	704	to read as follows:
705	705	Sec. 2210.6165. PROPERTY RIGHTS. If public securities
706	706	issued under this subchapter are outstanding, the rights and
707	707	interests of the association, a successor to the association, any
708	708	member of the association, or any member of the Texas FAIR Plan
709	709	Association, including the right to impose, collect, and receive a
710	710	premium surcharge [or a member assessment] authorized under this
711	711	subchapter, are only contract rights until those revenues are first
712	712	pledged for the repayment of the association's public security
713	713	obligations as provided by Section 2210.609.
714	714	SECTION 26. The following provisions of Chapter 2210,
715	715	Insurance Code, are repealed:
716	716	(1) Section 2210.075;
717	717	(2) Sections 2210.102(g) and (h);
718	718	(3) Sections 2210.602(5-a), (6-b), (6-c), and (10);
719	719	(4) Section 2210.605(c); and
720	720	(5) Section 2210.6136.
721	721	SECTION 27. (a) The board of directors of the Texas
722	722	Windstorm Insurance Association established under Section
723	723	2210.102, Insurance Code, as that section existed before amendment
724	724	by this Act, is abolished effective November 1, 2015.
725	725	(b) The governor shall appoint the members of the board of
726	726	directors of the Texas Windstorm Insurance Association under
727	727	Section 2210.102, Insurance Code, as amended by this Act, effective
728	728	November 1, 2015. The initial directors shall draw lots to achieve
729	729	staggered terms, with three of the directors serving one-year
730	730	terms, three of the directors serving two-year terms, and three of
731	731	the directors serving three-year terms.
732	732	(c) The term of a person who is serving as a member of the
733	733	board of directors of the Texas Windstorm Insurance Association
734	734	immediately before the abolition of that board under Subsection (a)
735	735	of this section expires on November 1, 2015. Such a person is
736	736	eligible for appointment by the governor to the new board of
737	737	directors of the Texas Windstorm Insurance Association under
738	738	Section 2210.102, Insurance Code, as amended by this Act.
739	739	(d) Notwithstanding Section 2210.4521, Insurance Code, as
740	740	added by this Act, or Subsection (e) of this section, beginning on
741	741	the effective date of this Act and continuing until December 31,
742	742	2015, the Texas Windstorm Insurance Association shall deposit 30
743	743	percent of its earned premium into the trust fund described by that
744	744	section. Not later than February 1, 2016, the association shall
745	745	direct the Texas Treasury Safekeeping Trust Company to deposit all
746	746	amounts deposited in the trust fund during the 2015 calendar year,
747	747	and interest earned on those funds, into the catastrophe reserve
748	748	trust fund as described by that section.
749	749	(e) Section 2210.4521, Insurance Code, as added by this Act,
750	750	applies to all Texas Windstorm Insurance Association premium earned
751	751	on and after January 1, 2016.
752	752	(f) Notwithstanding Subsection (d) of this section and
753	753	Section 2210.0715, Insurance Code, as added by this Act, amounts
754	754	collected under Section 2210.4521, Insurance Code, as added by this
755	755	Act, may not be used to pay for a covered insured association loss
756	756	incurred before June 1, 2015.
757	757	(g) Section 2210.5725, Insurance Code, as added by this Act,
758	758	applies only to adjustment of a claim made on or after the effective
759	759	date of this Act.
760	760	(h) It is the intent of the legislature that each member of
761	761	the legislative oversight board appointed under Section 2210.652,
762	762	Insurance Code, and serving on the effective date of this Act
763	763	continues to serve after the effective date of this Act until a
764	764	successor is appointed under that section.
765	765	SECTION 28. This Act takes effect immediately if it
766	766	receives a vote of two-thirds of all the members elected to each
767	767	house, as provided by Section 39, Article III, Texas Constitution.
768	768	If this Act does not receive the vote necessary for immediate
769	769	effect, this Act takes effect September 1, 2015.