84R8470 PMO-D
By: Taylor of Galveston, et al. S.B. No. 900
A BILL TO BE ENTITLED
AN ACT
relating to the operation of the Texas Windstorm Insurance
Association and the renaming of the Texas Windstorm Insurance
Association as the Texas Coastal Insurance Association.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. The heading to Chapter 2210, Insurance Code, is
amended to read as follows:
CHAPTER 2210. TEXAS COASTAL [WINDSTORM] INSURANCE ASSOCIATION
SECTION 2. Section 2210.001, Insurance Code, is amended to
read as follows:
Sec. 2210.001. PURPOSE. The primary purpose of the Texas
Coastal [Windstorm] Insurance Association is the provision of an
adequate market for windstorm and hail insurance in the seacoast
territory of this state. The legislature finds that the provision
of adequate windstorm and hail insurance is necessary to the
economic welfare of this state, and without that insurance, the
orderly growth and development of this state would be severely
impeded. This chapter provides a method by which adequate
windstorm and hail insurance may be obtained in certain designated
portions of the seacoast territory of this state. The association
is intended to serve as a residual insurer of last resort for
windstorm and hail insurance in the seacoast territory. The
association shall:
(1) function in such a manner as to not be a direct
competitor in the private market; and
(2) provide windstorm and hail insurance coverage to
those who are unable to obtain that coverage in the private market.
SECTION 3. Section 2210.002, Insurance Code, is amended by
amending Subsection (a) and adding Subsection (a-1) to read as
follows:
(a) This chapter may be cited as the Texas Coastal
[Windstorm] Insurance Association Act.
(a-1) A reference in this chapter or other law to the Texas
Windstorm Insurance Association means the Texas Coastal Insurance
Association.
SECTION 4. Section 2210.003, Insurance Code, is amended by
amending Subdivision (1) and adding Subdivisions (1-a) and (9-a) to
read as follows:
(1) "Administrator" means the entity contractually
retained to:
(A) manage the association and administer the
plan of operation under Section 2210.062; and
(B) manage the contracts with primary insurers
under Section 2210.063.
(1-a) "Association" means the Texas Coastal
[Windstorm] Insurance Association.
(9-a) "Primary insurer" means a member insurer that:
(A) has primary coverage for loss by fire on a
property that is or may be insured under this chapter; and
(B) acts on behalf of the association under this
chapter.
SECTION 5. Section 2210.014, Insurance Code, is amended by
amending Subsection (b) and adding Subsection (c) to read as
follows:
(b) Chapter 542 does not apply to [the processing and
settlement of claims by] the association or to an agent or
representative of the association.
(c) A primary insurer, adjuster, agent or representative of
the primary insurer, or the administrator contracted under Sections
2210.062 and 2210.063, is an agent of the association for purposes
of administering and issuing association policies and adjusting and
processing association claims under this chapter.
SECTION 6. Subchapter A, Chapter 2210, Insurance Code, is
amended by adding Section 2210.015 to read as follows:
Sec. 2210.015. STUDY OF MARKET INCENTIVES; BIENNIAL
REPORTING. (a) Each biennium, the department shall conduct a study
of market incentives to promote participation in the voluntary
windstorm and hail insurance market in the seacoast territory of
this state. The study must address as possible incentives the
mandatory or voluntary issuance of windstorm and hail insurance in
conjunction with the issuance of a homeowners policy in the
seacoast territory.
(b) The department shall include the results of the study
conducted under this section in the report submitted under Section
32.022.
SECTION 7. Subchapter B, Chapter 2210, Insurance Code, is
amended by adding Sections 2210.062, 2210.063, 2210.064, 2210.065,
2210.066, and 2210.067 to read as follows:
Sec. 2210.062. ADMINISTRATION BY CONTRACTED ADMINISTRATOR.
(a) Notwithstanding any other law, the commissioner shall contract
with an administrator to manage the association and administer the
plan of operation beginning December 1, 2015. The administrator
may not exercise any power under the contract before December 1,
2015.
(b) The administrator must hold either a managing general
agent license issued under Chapter 4053 or a third-party
administrator certificate of authority issued under Chapter 4151.
(c) The term of the administrator's contract may not exceed
five years. The contract may be renewed for additional terms not to
exceed five years for each term.
(d) In establishing the compensation paid to the
administrator under the contract, the commissioner shall consider
the cost of operations of the association and make every reasonable
effort to ensure that the cost of operations of the association
under the contract does not exceed average historical costs.
Sec. 2210.063. CONTRACTS BETWEEN ADMINISTRATOR AND PRIMARY
INSURERS. (a) Notwithstanding any other law, the administrator
shall contract with each primary insurer to administer and issue
association policies and adjust and process claims under
association policies beginning January 1, 2016. A primary insurer
may not exercise any power under the contract before January 1,
2016.
(b) In establishing the compensation paid to each primary
insurer under the contract, the administrator shall consider the
cost of operations of the association and make every reasonable
effort to ensure that the cost of operations of the association
under the contract does not exceed average historical costs.
Sec. 2210.064. PROPRIETARY INFORMATION. (a) Any
information, analyses, programs, or data acquired or created by the
administrator under a contract under this chapter are property of
the department.
(b) Information, analyses, programs, or data described by
Subsection (a) are confidential and exempt from public disclosure
under Chapter 552, Government Code.
Sec. 2210.065. OFFICE. (a) The administrator shall
maintain an office in Austin, Texas.
(b) The commissioner may arrange to lease office space of
the department to the administrator.
Sec. 2210.066. AUDIT. (a) The administrator is subject to
audit by the commissioner and shall pay the costs incurred by the
commissioner in performing an audit under this section in an amount
the commissioner finds reasonable.
(b) Work papers, as defined by Section 401.020(a), from an
audit are confidential and not subject to disclosure under Chapter
552, Government Code.
Sec. 2210.067. ANNUAL REPORT OF ADMINISTRATOR. (a) Not
later than March 1 of each year, the administrator shall submit a
report regarding the administrator's duties under this chapter to:
(1) the governor;
(2) the lieutenant governor;
(3) the speaker of the house of representatives;
(4) the senate committee on business and commerce or
the successor of that committee with jurisdiction over insurance;
(5) the house committee on insurance or the successor
of that committee with jurisdiction over insurance; and
(6) the legislative oversight board established under
Subchapter N.
(b) The report must be made in accordance with the terms of
the administrator's contract with the department.
SECTION 8. Subchapter B-1, Chapter 2210, Insurance Code, is
amended by amending Section 2210.071 and adding Sections 2210.0715
and 2210.0716 to read as follows:
Sec. 2210.071. PAYMENT OF EXCESS LOSSES[; PAYMENT FROM
RESERVES AND TRUST FUND]. [(a)] If, in a catastrophe year, an
occurrence or series of occurrences 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.
Sec. 2210.0715. PAYMENT FROM RESERVES AND TRUST FUND. [(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.
Sec. 2210.0716. PAYMENT FROM CLASS 1 ASSESSMENTS. (a)
Losses in a catastrophe year not paid under Section 2210.0715 shall
be paid as provided by this section from Class 1 member assessments
not to exceed $500 million for that catastrophe year.
(b) The administrator, with the approval of the
commissioner, shall notify each member 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.
(c) A member of the association may not recoup an assessment
paid under this section through a premium surcharge or tax credit.
[(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.]
SECTION 9. Sections 2210.072(a), (b), (b-1), (c), and (f),
Insurance Code, are amended to read as follows:
(a) Losses not paid under Sections 2210.0715 and 2210.0716
[Section 2210.071(b)] 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 before, 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 paid
[repaid] within a period not to exceed 10 [14] years[,] and may be
paid [repaid] sooner if the board of directors elects to do so and
the commissioner approves.
(b) Public securities described by Subsection (a) that are
issued before an occurrence or series of occurrences that results
in incurred losses:
(1) may be issued on the request of the board of
directors with the approval of the commissioner; and
(2) may not, in the aggregate, exceed $500 million [$1
billion] at any one time, regardless of the calendar year or years
in which the outstanding public securities were issued.
(b-1) Public securities described by Subsection (a):
(1) shall be issued as necessary in a principal amount
not to exceed $500 million [$1 billion] per catastrophe year, in the
aggregate, for securities issued during that catastrophe year
before the occurrence or series of occurrences that results in
incurred losses in that year and securities issued on or after the
date of that occurrence or series of occurrences, and regardless of
whether for a single occurrence or a series of occurrences; and
(2) subject to the [$1 billion] maximum described by
Subdivision (1), 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 that year, during the following calendar
year.
(c) If public securities are issued as described by this
section, the public securities shall be paid [repaid] in the manner
prescribed by Subchapter M [from association premium revenue].
(f) If, under Subsection (e), the proceeds of any
outstanding public securities issued during a previous catastrophe
year must be depleted, those proceeds shall count against the $500
million [$1 billion] limit on public securities described by this
section in the catastrophe year in which the proceeds must be
depleted.
SECTION 10. Subchapter B-1, Chapter 2210, Insurance Code,
is amended by adding Section 2210.0725 to read as follows:
Sec. 2210.0725. PAYMENT FROM CLASS 2 ASSESSMENTS. (a)
Losses in a catastrophe year not paid under Sections 2210.0715,
2210.0716, and 2210.072 shall be paid as provided by this section
from Class 2 member assessments not to exceed $500 million for that
catastrophe year.
(b) The administrator, with the approval of the
commissioner, shall notify each member 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.
(c) A member of the association may not recoup an assessment
paid under this section through a premium surcharge or tax credit.
SECTION 11. 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 2210.0715, 2210.0716, [2210.071 and]
2210.072, and 2210.0725 shall be paid as provided by this section
from the proceeds from Class 2 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
[under this subsection]. Public securities issued under this
section must be paid [repaid] within a period not to exceed 10
years[,] and may be paid [repaid] sooner if the board of directors
elects to do so and the commissioner approves.
(b) Public securities described by Subsection (a):
(1) shall [may] be issued as necessary in a principal
amount not to exceed $500 million [$1 billion] per catastrophe
year, in the aggregate, whether for a single occurrence or a series
of occurrences; and
(2) subject to the [$1 billion] maximum described by
Subdivision (1), 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 that year, during the following calendar
year.
(c) If the losses are paid with public securities described
by this section, the public securities shall be paid [repaid] in the
manner prescribed by Subchapter M.
SECTION 12. Section 2210.102, Insurance Code, is amended to
read as follows:
Sec. 2210.102. COMPOSITION. (a) The board of directors is
composed of nine members appointed by the governor [commissioner]
in accordance with this section.
(b) Three [Four] members must be representatives of the
insurance industry who actively write and renew windstorm and hail
insurance in the first tier coastal counties.
(c) Three [Four] members must, as of the date of the
appointment, reside in the first tier coastal counties. Each of
the following regions must be represented by a member residing in
the region and [At least one of the members] appointed under this
subsection:
(1) the region consisting of Cameron, Kenedy, Kleberg,
and Willacy Counties;
(2) the region consisting of Aransas, Calhoun, Nueces,
Refugio, and San Patricio Counties; and
(3) the region consisting of Brazoria, Chambers,
Galveston, Jefferson, and Matagorda Counties and any part of Harris
County designated as a catastrophe area under Section 2210.005.
(c-1) One of the members appointed under Subsection (c) must
be a property and casualty agent who is licensed under this code and
is not a captive agent.
(d) One member must be a representative of an area of this
state that is not located in the seacoast territory [with
demonstrated expertise in insurance and actuarial principles].
(d-1) One member must be an engineer who:
(1) is knowledgeable of, and has professional
expertise in, wind-related design and construction practices in
coastal areas that are subject to high winds and hurricanes; and
(2) resides in a second tier coastal county.
(d-2) One member must be a representative of the financial
industry who resides in a second tier coastal county.
(e) All members must have demonstrated experience in
insurance, general business, or actuarial principles and the
member's area of expertise, if any, sufficient to make the success
of the association probable.
(f) Insurers who are members of the association shall
nominate, from among those members, persons to fill any vacancy in
the three [four] board of director seats reserved for
representatives of the insurance industry. The board of directors
shall solicit nominations from the members and submit the
nominations to the governor [commissioner]. The nominee slate
submitted to the governor [commissioner] under this subsection must
include at least three more names than the number of vacancies. The
governor may [commissioner shall] appoint replacement insurance
industry representatives from the nominee slate.
(g) In addition to the nine members appointed under
Subsection (a), the governor [The commissioner] shall appoint three
individuals [one person] to serve as [a] nonvoting ex officio
members [member] of the board to advise the board [regarding issues
relating to the inspection process. The commissioner may give
preference in an appointment under this subsection to a person who
is a qualified inspector under Section 2210.254]. Each [The]
nonvoting member appointed under this section must:
(1) hold an elective office of this state or a
political subdivision of this state; and
(2) reside in and represent one of the following
areas:
(A) the northern portion of the seacoast
territory [be an engineer licensed by, and in good standing with,
the Texas Board of Professional Engineers];
(B) the southern portion of the seacoast
territory [(2) reside in a first tier coastal county]; or [and]
(C) an area of this state that is not located in
the seacoast territory [(3) be knowledgeable of, and have
professional expertise in, wind-related design and construction
practices in coastal areas that are subject to high winds and
hurricanes].
(h) The persons appointed under Subsection (g) [(c)] must
each reside in a [be from] different area described by Subsection
(g)(2) and in different counties.
SECTION 13. Section 2210.103(c), Insurance Code, is amended
to read as follows:
(c) A member of the board of directors may be removed by the
governor [commissioner] with cause stated in writing and posted on
the association's website. The governor [commissioner] shall
appoint a replacement in accordance with [the manner provided by]
Section 2210.102 for a member who leaves or is removed from the
board of directors.
SECTION 14. Chapter 2210, Insurance Code, is amended by
adding Subchapter D-1 to read as follows:
SUBCHAPTER D-1. PRIMARY INSURER
Sec. 2210.175. ADMINISTRATION AND ISSUANCE OF ASSOCIATION
POLICIES AND ADJUSTMENT AND PROCESSING OF CLAIMS BY PRIMARY
INSURER. (a) A primary insurer that has primary coverage on
property for loss by fire shall administer and issue an association
policy providing windstorm and hail insurance coverage for the same
property and adjust and process all claims made on the association
policy in accordance with this chapter, the plan of operation, and
the contract entered into under Section 2210.063.
(b) An insurer acting under this chapter is an agent of the
association for purposes of Sections 2210.014 and 2210.572.
(c) An insurer acting in accordance with this section is not
liable for any amount payable under the terms of the association
policy.
SECTION 15. Subchapter E, Chapter 2210, Insurance Code, is
amended by adding Sections 2210.2022 and 2210.211 to read as
follows:
Sec. 2210.2022. INFORMATION REQUIRED FOR CERTAIN
APPLICATIONS. An application for association coverage, including
an application for new or renewal coverage on or after January 1,
2016, must include information on any policy covering the property
for perils other than windstorm and hail, including:
(1) the total premium for the policy, including a
policy number for coverage issued by the FAIR Plan Association
under Chapter 2211, if applicable, and:
(A) the amount of insurance on the dwelling and
contents provided by the policy; or
(B) if the policy is a tenants policy or
condominium owners policy, the insured amount for the contents
coverage; and
(2) the deductibles applicable for the policy.
Sec. 2210.211. CONFIDENTIAL INFORMATION. (a) Except as
provided by Subsection (b), all information, data, and databases
collected and used under Section 2210.2022 are confidential
information not subject to disclosure under Chapter 552, Government
Code.
(b) Information described by Subsection (a) may be used for
the purposes and in the manner described by this chapter and Chapter
2211.
SECTION 16. The heading to Subchapter J, Chapter 2210,
Insurance Code, is amended to read as follows:
SUBCHAPTER J. CATASTROPHE RESERVE TRUST FUND; [AND] REINSURANCE AND
ALTERNATIVE RISK FINANCING [PROGRAM]
SECTION 17. Section 2210.452, Insurance Code, is amended by
amending Subsections (a), (c), and (d) and adding Subsection (f) to
read as follows:
(a) The commissioner shall adopt rules under which the
association makes payments to the catastrophe reserve trust fund.
Except as otherwise specifically provided by this section, the
[The] trust fund may be used only for purposes directly related to
funding the payment of insured losses, including:
(1) funding [to fund] the obligations of the trust
fund under Subchapter B-1; and
(2) purchasing reinsurance or using alternative risk
financing mechanisms under Section 2210.453.
(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, operating expenses,
public security obligations, and public security administrative
expenses, to make payments to the trust fund, [to] procure
reinsurance, or use alternative risk financing mechanisms, or to
make payments to the trust fund and [to] procure reinsurance or use
alternative risk financing mechanisms.
(d) The commissioner by rule shall establish the procedure
relating to the disbursement of money from the trust fund to
policyholders and for association administrative expenses directly
related to funding the payment of insured losses in the event of an
occurrence or series of occurrences within a catastrophe area that
results in a disbursement under Subchapter B-1.
(f) The commissioner by rule shall establish the procedure
relating to the disbursement of money from the trust fund to pay for
operating expenses, including reinsurance or alternative risk
financing mechanisms under Section 2210.453, if the association
does not have sufficient premium and other revenue.
SECTION 18. Section 2210.453, Insurance Code, is amended to
read as follows:
Sec. 2210.453. REINSURANCE AND ALTERNATIVE RISK FINANCING
MECHANISMS. (a) The association shall [may:
[(1) make payments into the trust fund; and
[(2)] purchase reinsurance or use alternative risk
financing mechanisms in an amount equal to the probable maximum
loss for the association for a catastrophe year with a probability
of one in 100.
(b) Any [The association may purchase] reinsurance
purchased or alternative risk financing mechanism used under this
section operates [that operates] in addition to [or in concert with
the trust fund,] public securities, other approved financial
instruments, and assessments authorized by this chapter.
(c) The attachment point for reinsurance purchased under
this section may not be less than the aggregate amount of all
funding available to the association under Subchapter B-1. [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 required by
this subsection must:
[(1) document and denominate the association's
resources available to pay claims, including cash or other highly
liquid assets, assessments that the association is projected to
impose, pre-event and post-event bonding capacity, and
private-sector recognized risk-transfer mechanisms, including
catastrophe bonds and reinsurance;
[(2) include an independent, third-party appraisal of
the likelihood of an assessment, the maximum potential size of the
assessment, and an estimate of the probability that the assessment
would not be adequate to meet the association's needs; and
[(3) include an analysis of financing alternatives to
assessments that includes the costs of borrowing and the
consequences that additional purchase of reinsurance, catastrophe
bonds, or other private-sector recognized risk-transfer
instruments would have in reducing the size or potential of
assessments.
[(d) A person who prepares a report required by Subsection
(c) may not contract to provide any other service to the
association, except for the preparation of similar reports, before
the third anniversary of the date the last report prepared by the
person under that subsection is submitted.
[(e) The report submitted under this section is for
informational purposes only and does not bind the association to a
particular course of action.]
SECTION 19. Section 2210.602, Insurance Code, is amended by
adding Subdivisions (2-a) and (3-a) to read as follows:
(2-a) "Class 1 public security trust fund" means the
dedicated trust fund established by the board and held by the Texas
Treasury Safekeeping Trust Company into which premium surcharges
collected under Section 2210.612 for the purpose of repaying Class
1 public securities are deposited.
(3-a) "Class 2 public security trust fund" means the
dedicated trust fund established by the board and held by the Texas
Treasury Safekeeping Trust Company into which premium surcharges
collected under Section 2210.613 for the purpose of repaying Class
2 public securities are deposited.
SECTION 20. Section 2210.604(a), Insurance Code, is amended
to read as follows:
(a) At the request of the association and with the approval
of the commissioner, the Texas Public Finance Authority shall issue
Class 1 or [,] Class 2[, or Class 3] public securities. The
association shall submit to the commissioner a cost-benefit
analysis of various financing methods and funding structures when
requesting the issuance of public securities under this subsection.
SECTION 21. 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 as required by this subchapter
[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 and [,] 2210.613,
[2210.6135, and 2210.6136] as applicable. Class 1 or [,] Class
2[, or Class 3] public securities may be issued on a parity or
subordinate lien basis with other Class 1 or [,] Class 2[, or Class
3] public securities, respectively.
(b) If any public securities issued under this chapter are
outstanding, the authority shall notify the association of the
amount of the public security obligations and the estimated amount
of public security administrative expenses, if any, each calendar
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 2210.612 in the Class 1 public security trust fund and
[public security obligation revenue fund,] all revenue collected
under Section 2210.613 [2210.613(b)] in the Class 2 public security
trust fund [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 fund may be invested as
permitted by general law. Money in a 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 Class 1 public security trust fund [public security
obligation revenue fund, the premium surcharge trust fund,] or the
Class 2 public security trust fund [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 Class 1 public security trust fund [public security obligation
revenue fund, the premium surcharge trust fund,] and the Class 2
public security trust fund [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 Class 1 public security trust fund [premium
surcharge trust fund], and the Class 2 public security trust fund
[member assessment trust fund] to the extent provided in the
proceedings authorizing the credit agreement.
SECTION 22. Section 2210.610(a), Insurance Code, is amended
to read as follows:
(a) Revenues received from the premium surcharges under
Sections 2210.612 and [Section] 2210.613 [and member assessments
under Sections 2210.613 and 2210.6135] may be applied only as
provided by this subchapter.
SECTION 23. Section 2210.611, Insurance Code, is amended to
read as follows:
Sec. 2210.611. EXCESS REVENUE COLLECTIONS AND INVESTMENT
EARNINGS. Revenue collected in any calendar year from a premium
surcharge under Sections 2210.612 and [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 calendar year and
interest earned on the funds [public security obligation fund] may,
in the discretion of the association, be:
(1) used to pay public security obligations payable in
the subsequent calendar 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 24. 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:
(1) [its] net premium and other revenue; and
(2) if net premium and other revenue are not
sufficient to pay the securities, a catastrophe area premium
surcharge collected in accordance with this section.
(b) On approval by the commissioner, the association shall
assess, as provided by this section, a premium surcharge to each
policyholder of a policy described by Subsection (c). 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 and all related expenses on the
public securities.
(c) The premium surcharge under this section shall be
assessed on all policyholders of association policies issued under
this chapter.
(d) A premium surcharge under this section is a separate
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.
(e) [(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. 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).
SECTION 25. Section 2210.613, Insurance Code, is amended to
read as follows:
Sec. 2210.613. PAYMENT OF CLASS 2 PUBLIC SECURITIES. (a)
The association shall pay Class 2 public securities issued under
Section 2210.073 from:
(1) net premium and other revenue; and
(2) if net premium and other revenue are not
sufficient to pay the securities, a catastrophe area premium
surcharge collected in accordance with this section.
(b) On approval by the commissioner, the association and
each insurer that provides insurance in a catastrophe area shall
assess, as provided by this section, a premium surcharge to each
policyholder of a policy described by Subsection (c). 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 and all related expenses on the
public securities [as provided by this section. Thirty percent of
the cost of the public securities shall be paid 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].
[(b) Seventy percent of the cost of the public securities
shall be paid by a 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. 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 this section [Subsection
(b)] shall be assessed on all policyholders of policies that cover
insured property that is located in a catastrophe area, including
automobiles principally garaged in a catastrophe area. The
premium surcharge shall be assessed on 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.
The [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 automobile liability and physical
damage insurance; and
(2) the property insurance portion of a commercial
multiple peril insurance policy.
(d) A premium surcharge under this section [Subsection (b)]
is a separate 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 26. Section 2210.614, Insurance Code, is amended to
read as follows:
Sec. 2210.614. REFINANCING PUBLIC SECURITIES. The
association may request the board to refinance any public
securities issued in accordance with Subchapter B-1, whether Class
1 or [,] Class 2[, or Class 3] public securities, with public
securities payable from the same sources as the original public
securities.
SECTION 27. Section 2210.616(a), Insurance Code, is amended
to read as follows:
(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 Class 1
public security [member assessment] trust fund or Class 2 public
security [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) in any way impair the rights and remedies of the
public security owners until the public securities are fully
discharged.
SECTION 28. Section 2210.6165, Insurance Code, is amended
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 29. The following provisions of Chapter 2210,
Insurance Code, are repealed:
(1) Section 2210.074;
(2) Sections 2210.602(4), (5-a), (6-b), (6-c), and
(10);
(3) Section 2210.605(c); and
(4) Sections 2210.6135 and 2210.6136.
SECTION 30. (a) The board of directors of the Texas
Windstorm Insurance Association established under Section
2210.102, Insurance Code, as that section existed before amendment
by this Act, is abolished effective October 1, 2015.
(b) The governor shall appoint the members of the board of
directors of the Texas Coastal Insurance Association under Section
2210.102, Insurance Code, as amended by this Act, effective October
1, 2015. The initial directors shall draw lots to achieve staggered
terms, with three of the directors serving one-year terms, three of
the directors serving two-year terms, and three of the directors
serving three-year terms.
(c) The term of a person who is serving as a member of the
board of directors of the Texas Windstorm Insurance Association
immediately before the abolition of that board under Subsection (a)
of this section expires on October 1, 2015. Such a person is
eligible for appointment by the governor to the new board of
directors of the Texas Coastal Insurance Association under Section
2210.102, Insurance Code, as amended by this Act.
(d) Section 2210.175, Insurance Code, as added by this Act,
applies only to administering or issuing a policy or adjusting or
processing a claim under a policy issued on or after January 1,
2016.
(e) Subchapter M, Chapter 2210, Insurance Code, as it
existed before the effective date of this Act, is applicable to bond
obligations incurred under Chapter 2210, Insurance Code, before the
effective date of this Act, and that law is continued in effect for
that purpose.
(f) It is the intent of the legislature that each member of
the legislative oversight board appointed under Section 2210.652,
Insurance Code, and serving on the effective date of this Act
continues to serve after the effective date of this Act until a
successor is appointed under that section.
SECTION 31. 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, 2015.