84R29798 PMO-D
By: Taylor of Galveston, et al. S.B. No. 900
(Bonnen of Galveston)
Substitute the following for S.B. No. 900: No.
A BILL TO BE ENTITLED
AN ACT
relating to the operation of the Texas Windstorm Insurance
Association.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 2210.003, Insurance Code, is amended by
amending Subdivision (1) and adding Subdivision (1-a) to read as
follows:
(1) "Administrator" means an entity contractually
retained to manage the association and administer the plan of
operation under Section 2210.062.
(1-a) "Association" means the Texas Coastal
[Windstorm] Insurance Association.
SECTION 2. 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) An administrator contracted under Section 2210.062, if
applicable, is an agent of the association for purposes of managing
the association and administering the plan of operation under this
chapter.
SECTION 3. 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 4. Subchapter B, Chapter 2210, Insurance Code, is
amended by adding Section 2210.062 to read as follows:
Sec. 2210.062. ADMINISTRATION BY CONTRACTED ADMINISTRATOR
AUTHORIZED. (a) Notwithstanding any other law, if determined by
the commissioner to be in the best interest of the policyholders and
the public, the commissioner may contract with an administrator to
manage the association and administer the plan of operation.
(b) The commissioner shall adopt rules as necessary to
implement this section if the commissioner determines management of
the association and administration of the plan of operation by an
administrator is in the best interest of the policyholders and the
public.
(c) 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.
SECTION 5. Subchapter B-1, Chapter 2210, Insurance Code, is
amended by amending Section 2210.071 and adding Section 2210.0715
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.
[(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 6. Section 2210.072, Insurance Code, is amended to
read as follows:
Sec. 2210.072. PAYMENT FROM CLASS 1 PUBLIC SECURITIES
ISSUED BEFORE JUNE 1, 2015[; FINANCIAL INSTRUMENTS]. (a) Losses
not paid under Section 2210.0715 [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 on or before June 1, 2015 [before, on, or after the
date of any occurrence or series of occurrences that results in
insured losses]. Public securities described by [issued under]
this section must be repaid within a period not to exceed 14 years,
and may be repaid sooner if the board of directors elects to do so
and the commissioner approves.
[(b) Public securities described by Subsection (a) 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 $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 $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) Public [If public] securities [are] issued as described
by this section[, the public securities] shall be repaid in the
manner prescribed by Subchapter M from association premium revenue.
(d) The association may borrow from, or enter into other
financing arrangements with, any market source, under which the
market source makes interest-bearing loans or other financial
instruments to the association to enable the association to pay
losses under this section or to obtain public securities under this
section. For purposes of this subsection, financial instruments
includes commercial paper.
[(e) The proceeds of any outstanding public securities
described by Subsection (a) that are issued before an occurrence or
series of occurrences shall be depleted before the proceeds of any
securities issued after an occurrence or series of occurrences may
be used. This subsection does not prohibit the association from
issuing securities after an occurrence or series of occurrences
before the proceeds of outstanding public securities issued during
a previous catastrophe year have been depleted.
[(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 $1
billion limit on public securities described by this section in the
catastrophe year in which the proceeds must be depleted.]
SECTION 7. Subchapter B-1, Chapter 2210, Insurance Code, is
amended by adding Section 2210.0725 to read as follows:
Sec. 2210.0725. PAYMENT FROM CLASS 1 ASSESSMENTS. (a)
Losses in a catastrophe year not paid under Sections 2210.0715 and
2210.072 shall be paid as provided by this section from Class 1
member assessments not to exceed $500 million for that catastrophe
year.
(b) The association, 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 8. 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, [2210.071 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 $250 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 9. Section 2210.074, Insurance Code, is amended to
read as follows:
Sec. 2210.074. PAYMENT THROUGH CLASS 2 ASSESSMENTS [3
PUBLIC SECURITIES]. (a) Losses in a catastrophe year not paid
under Sections 2210.0715, [2210.071,] 2210.072, 2210.0725, and
2210.073 shall be paid as provided by this section from Class 2
member assessments not to exceed $250 million for that catastrophe
year.
(b) The association, 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
[proceeds from public securities authorized to be issued in
accordance with Subchapter M on or after the date of any occurrence
that results in insured losses under this subsection or through
reinsurance as described by Section 2210.075. Public securities
issued under this section must be repaid within a period not to
exceed 10 years, and may be repaid sooner if the board of directors
elects to do so and the commissioner approves.
[(b) Public securities described by Subsection (a):
[(1) may be issued as necessary in a principal amount
not to exceed $500 million per catastrophe year, in the aggregate,
whether for a single occurrence or a series of occurrences; and
[(2) subject to the $500 million 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 repaid in the manner
prescribed by Subchapter M through member assessments as provided
by this section. The association shall notify each member of the
association of the amount of the member's assessment under this
section. The proportion of the losses allocable to each insurer
under this section shall be determined in the manner used to
determine each insurer's participation in the association for the
year under Section 2210.052. A member of the association may not
recoup an assessment paid under this subsection through a premium
surcharge or tax credit].
SECTION 10. Subchapter B-1, Chapter 2210, Insurance Code,
is amended by adding Sections 2210.0741 and 2210.0742 to read as
follows:
Sec. 2210.0741. PAYMENT THROUGH CLASS 3 PUBLIC SECURITIES.
(a) Losses not paid under Sections 2210.0715, 2210.072, 2210.0725,
2210.073, and 2210.074 shall be paid as provided by this section
from proceeds from public securities authorized to be issued in
accordance with Subchapter M on or after the date of any occurrence
that results in insured losses under this subsection or through
reinsurance as described by Section 2210.075. Public securities
issued under this section must be paid within a period not to exceed
10 years, and may be paid sooner if the board of directors elects to
do so and the commissioner approves.
(b) Public securities described by Subsection (a):
(1) may be issued as necessary in a principal amount
not to exceed $250 million per catastrophe year, in the aggregate,
whether for a single occurrence or a series of occurrences; and
(2) subject to the 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 in the manner
prescribed by Subchapter M.
Sec. 2210.0742. PAYMENT FROM CLASS 3 ASSESSMENTS.
(a) Losses in a catastrophe year not paid under Sections
2210.0715, 2210.072, 2210.0725, 2210.073, 2210.074, and 2210.0741
shall be paid as provided by this section from Class 3 member
assessments not to exceed $250 million for that catastrophe year.
(b) The association, 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 2210.075, Insurance Code, is amended to
read as follows:
Sec. 2210.075. REINSURANCE. (a) Before any occurrence or
series of occurrences, an insurer may elect to purchase reinsurance
to cover an assessment for which the insurer would otherwise be
liable under this subchapter [Section 2210.074(c)].
(b) An insurer must notify the board of directors, in the
manner prescribed by the association whether the insurer will be
purchasing reinsurance. If the insurer does not elect to purchase
reinsurance under this section, the insurer remains liable for any
assessment imposed under this subchapter [Section 2210.074(c)].
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 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) Three members [One member] must represent [be a
representative of] an area of this state that is [not] located more
than 200 miles from the Texas coastline [in the seacoast territory
with demonstrated expertise in insurance and actuarial
principles].
(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 commissioner. The nominee slate submitted to
the commissioner under this subsection must include at least three
more names than the number of vacancies. The commissioner may
[shall] appoint replacement insurance industry representatives
from the nominee slate.
(g) In addition to the nine members appointed under
Subsection (a), the [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
commissioner with cause stated in writing and posted on the
association's website. The 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. 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 15. 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 16. 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 not less than 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 17. Section 2210.501, Insurance Code, is amended by
adding Subsection (d) to read as follows:
(d) Notwithstanding Section 2210.502, maximum liability
limits for coverage described by Subsection (b)(1) or (3) may not
exceed $1,500,000.
SECTION 18. Section 2210.602, Insurance Code, is amended by
amending Subdivision (4) and adding Subdivisions (3-a) and (4-a) to
read as follows:
(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 paying Class 2
public securities are deposited.
(4) "Class 3 public securities" means public
securities authorized to be issued on or after the occurrence of a
catastrophic event by Section 2210.0741 [2210.074].
(4-a) "Class 3 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 2210.6131 for the purpose of paying Class 3
public securities are deposited.
SECTION 19. 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, 2210.613, and
2210.6131 [2210.6135, and 2210.6136] as applicable. Class 1, Class
2, or Class 3 public securities may be issued on a parity or
subordinate lien basis with other Class 1, Class 2, or Class 3
public securities, respectively.
(b) If any public securities issued under this chapter are
outstanding, the authority 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 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 Section 2210.6131 [Sections
2210.613(a) and 2210.6135] in the Class 3 public security [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 public
security obligation revenue fund, the Class 2 public security
[premium surcharge] trust fund, or the Class 3 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 public security obligation revenue fund, the Class 2 public
security [premium surcharge] trust fund, and the Class 3 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 2 public security [premium surcharge] trust
fund, and the Class 3 public security trust fund [member assessment
trust fund] to the extent provided in the proceedings authorizing
the credit agreement.
SECTION 20. Section 2210.610(a), Insurance Code, is amended
to read as follows:
(a) Revenues received from the premium surcharges under
Sections [Section] 2210.613 and 2210.6131 [and member assessments
under Sections 2210.613 and 2210.6135] may be applied only as
provided by this subchapter.
SECTION 21. 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 [Section] 2210.613 and 2210.6131 [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 22. 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 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 association policies
issued under this chapter [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. 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 23. Subchapter M, Chapter 2210, Insurance Code, is
amended by adding Section 2210.6131 to read as follows:
Sec. 2210.6131. PAYMENT OF CLASS 3 PUBLIC SECURITIES. (a)
The association shall pay Class 3 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 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.
SECTION 24. 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
applicable [member assessment trust fund or premium surcharge]
trust fund;
(2) reduce, alter, or impair the [member assessments
or] premium surcharges to be imposed, collected, and remitted to
financing parties until the principal, interest, and premium, and
any other charges incurred and contracts to be performed in
connection with the related public securities, have been paid and
performed in full; or
(3) in any way impair the rights and remedies of the
public security owners until the public securities are fully
discharged.
SECTION 25. 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 26. The following provisions of the Insurance Code
are repealed:
(1) Sections 2210.602(5-a), (6), (6-b), and (6-c);
(2) Section 2210.605(c); and
(3) Sections 2210.6135 and 2210.6136.
SECTION 27. (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 commissioner shall appoint the members of the board
of directors of the Texas Windstorm 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 commissioner to the new board of
directors of the Texas Windstorm Insurance Association under
Section 2210.102, Insurance Code, as amended by this Act.
(d) 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 28. 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.