86R28275 JES-D
By: Lucio III, Hunter, Herrero, H.B. No. 4534
Bonnen of Galveston, Middleton, et al.
A BILL TO BE ENTITLED
AN ACT
relating to the rates and other funding of the Texas Windstorm
Insurance Association.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 2210.071, Insurance Code, is amended to
read as follows:
Sec. 2210.071. PAYMENT OF EXCESS LOSSES. (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.
(b) The association may not pay insured losses and operating
expenses resulting from an occurrence or series of occurrences in a
catastrophe year with premium and other revenue earned in a
subsequent year.
SECTION 2. Section 2210.0715, Insurance Code, is amended to
read as follows:
Sec. 2210.0715. PAYMENT FROM RESERVES AND TRUST FUND. (a)
The association shall pay losses resulting from an occurrence or
series of occurrences in a catastrophe year in excess of premium and
other revenue of the association for that catastrophe year from
[available] reserves of the association available before or accrued
during that catastrophe year and [available] amounts in the
catastrophe reserve trust fund available before or accrued during
that catastrophe year.
(b) Proceeds of [Class 1] public securities issued or
assessments made before or as a result [the date] of any occurrence
or series of occurrences in a catastrophe year that results in
insured losses may not be included in [available] reserves
available for a subsequent catastrophe year for purposes of this
section.
SECTION 3. Subchapter C, Chapter 2210, Insurance Code, is
amended by adding Section 2210.1052 to read as follows:
Sec. 2210.1052. EMERGENCY MEETING. If the final estimate
of losses for an occurrence or series of occurrences made by the
chief financial officer or chief actuary of the association
indicates member insurers may be subject to an assessment under
Subchapter B-1, the board of directors shall call an emergency
meeting of the members of the association to notify the members
about the assessment.
SECTION 4. (a) Effective December 1, 2019, Section
2210.351(d), Insurance Code, is amended to read as follows:
(d) The association may use a rate filed by the association
without prior commissioner approval if:
(1) the filing is made not later than the 30th day
before the date of any use or delivery for use of the rate;
(2) the filed rate does not exceed [105 percent of] the
rate in effect on the date on which the filing is made;
(3) the filed rate does not reflect a rate [change] for
an individual rating class that is [10 percent] higher than the rate
in effect for that rating class on the date on which the filing is
made; and
(4) the commissioner has not disapproved the filing in
writing, advising of the reasons for the disapproval and the
criteria the association is required to meet to obtain approval.
(b) Effective September 1, 2021, Section 2210.351(d),
Insurance Code, is amended to read as follows:
(d) The association may use a rate filed by the association
without prior commissioner approval if:
(1) the filing is made not later than the 30th day
before the date of any use or delivery for use of the rate;
(2) the filed rate does not exceed 105 percent of the
rate in effect on the date on which the filing is made;
(3) the filed rate does not reflect a rate change for
an individual rating class that is 10 percent higher than the rate
in effect for that rating class on the date on which the filing is
made; and
(4) the commissioner has not disapproved the filing in
writing, advising of the reasons for the disapproval and the
criteria the association is required to meet to obtain approval.
SECTION 5. (a) Effective December 1, 2019, Section
2210.352(a-1), Insurance Code, is amended to read as follows:
(a-1) The association may use a rate filed by the
association under this section without prior commissioner approval
if:
(1) the filing is made not later than the 30th day
before the date of any use or delivery for use of the rate;
(2) the filed rate does not exceed [105 percent of] the
rate used by the association in effect on the date on which the
filing is made; and
(3) the filed rate does not reflect a rate [change] for
an individual rating class that is [10 percent] higher than the rate
in effect for that rating class on the date on which the filing is
made.
(b) Effective September 1, 2021, Section 2210.352(a-1),
Insurance Code, is amended to read as follows:
(a-1) The association may use a rate filed by the
association under this section without prior commissioner approval
if:
(1) the filing is made not later than the 30th day
before the date of any use or delivery for use of the rate;
(2) the filed rate does not exceed 105 percent of the
rate used by the association in effect on the date on which the
filing is made; and
(3) the filed rate does not reflect a rate change for
an individual rating class that is 10 percent higher than the rate
in effect for that rating class on the date on which the filing is
made.
SECTION 6. Section 2210.452, Insurance Code, is amended by
amending Subsection (c) and adding Subsection (c-1) to read as
follows:
(c) In addition to the payment required by Subsection (c-1),
at [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, procure reinsurance,
or use alternative risk financing mechanisms, or to make payments
to the trust fund and procure reinsurance or use alternative risk
financing mechanisms.
(c-1) The association shall annually pay to the catastrophe
reserve trust fund 20 percent of net earned premium of the
association.
SECTION 7. Chapter 2210, Insurance Code, is amended by
adding Subchapter N-1 to read as follows:
SUBCHAPTER N-1. LEGISLATIVE FUNDING AND FUNDING STRUCTURE
OVERSIGHT BOARD
Sec. 2210.661. DEFINITION. In this subchapter, "board"
means the windstorm insurance legislative funding and funding
structure oversight board.
Sec. 2210.662. COMPOSITION OF BOARD. The board is composed
of eight members as follows:
(1) four members of the senate appointed by the
lieutenant governor; and
(2) four members of the house of representatives
appointed by the speaker of the house of representatives.
Sec. 2210.663. POWERS AND DUTIES OF BOARD. (a) The board
shall:
(1) gather information regarding:
(A) how the association's current funding and
funding structure operate;
(B) how the catastrophic risk pools of other
states operate; and
(C) other information that the board considers
necessary to prepare the report required by Section 2210.664; and
(2) hold public meetings to hear testimony from
experts, stakeholders, and other interested parties regarding
recommendations and proposals for establishing and implementing
sustainable funding and a sustainable funding structure for the
association.
(b) The board may request reports and other information as
necessary to implement this subchapter from:
(1) the department;
(2) the association; and
(3) experts, stakeholders, and other interested
parties described by Subsection (a)(2).
Sec. 2210.664. REPORT. (a) The board shall prepare a
report of the board's findings regarding the current funding and
funding structure of the association, problems with the funding and
funding structure, and recommendations for legislative action
related to the funding, funding structure, and sustainability of
the association. The report must include:
(1) an analysis of the current funding, funding
structure, and sustainability of the association, including the
association's reliance on debt and reinsurance; and
(2) recommendations for legislative action necessary
to:
(A) address problems with the current funding and
funding structure of the association; and
(B) foster the stability and sustainability of
the association.
(b) Not later than November 15, 2020, the board shall
deliver the report prepared under Subsection (a) to:
(1) the governor;
(2) the lieutenant governor; and
(3) the speaker of the house of representatives.
Sec. 2210.665. EXPIRATION. This subchapter expires
September 1, 2021.
SECTION 8. As soon as practicable after the effective date
of this Act, the Texas Windstorm Insurance Association, through the
board of directors of that association, shall propose to the
commissioner of insurance amendments to the association's plan of
operation to be effective before the hurricane season of 2020 as
necessary under Chapter 2210, Insurance Code, as amended by this
Act.
SECTION 9. (a) Sections 2210.351(d) and 2210.352(a-1),
Insurance Code, as amended by this Act effective December 1, 2019,
apply only to a rate filed by the Texas Windstorm Insurance
Association with the Texas Department of Insurance on or after
December 1, 2019. A rate filed with the Texas Department of
Insurance before December 1, 2019, is governed by the law as it
existed immediately before that date, and that law is continued in
effect for that purpose.
(b) Sections 2210.351(d) and 2210.352(a-1), Insurance Code,
as amended by this Act effective September 1, 2021, apply only to a
rate filed by the Texas Windstorm Insurance Association with the
Texas Department of Insurance on or after September 1, 2021. A rate
filed with the Texas Department of Insurance before September 1,
2021, is governed by the law applicable to the rate immediately
before that date, and that law is continued in effect for that
purpose.
SECTION 10. Except as otherwise provided by this Act, this
Act takes effect December 1, 2019.