By: Taylor S.B. No. 2443
A BILL TO BE ENTITLED
AN ACT
relating to the abolition of the Fair Access to Insurance
Requirements Plan and transfer of the plan's assets, financial
obligations, duties, and powers to the Texas Windstorm Insurance
Association.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
ARTICLE 1. RESIDENTIAL PROPERTY INSURANCE
SECTION 1.01. Section 2210.001, Insurance Code, is amended
to read as follows:
Sec. 2210.001. PURPOSE. The primary purpose of the Texas
Windstorm Insurance Association is the provision of an adequate
market for windstorm and hail insurance in the seacoast territory
of this state and residential property insurance in this state. The
legislature finds that the provision of adequate windstorm and hail
insurance and residential property 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 and residential
property insurance may be obtained throughout this state. The
association is intended to serve as a residual insurer of last
resort for windstorm and hail insurance in the seacoast territory
and residential property insurance in this state. 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 and
residential property insurance coverage to those who are unable to
obtain that coverage in the private market.
SECTION 1.02. Section 2210.003, Insurance Code, is amended
by amending Subdivision (6) and adding Subdivision (9-a) to read as
follows:
(6) "Insurance" means:
(A) Texas windstorm and hail insurance; and
(B) residential property insurance.
(9-a) "Residential property insurance" means the
coverage provided by a homeowners insurance policy, residential
fire and allied lines insurance policy, or farm and ranch owners
insurance policy against loss incurred to real or tangible personal
property.
SECTION 1.03 Sections 2210.004(a) and (g), Insurance Code,
are amended to read as follows:
(a) Except as provided by Subsection (h), for purposes of
this chapter and subject to this section, "insurable property" for
purposes of windstorm and hail insurance means immovable property
at a fixed location in a catastrophe area or corporeal movable
property located in that immovable property, as designated in the
plan of operation, that is determined by the association according
to the criteria specified in the plan of operation to be in an
insurable condition against windstorm and hail, as determined by
normal underwriting standards. The term includes property
described by Section 2210.209.
(g) For purposes of windstorm and hail insurance issued
under this chapter, a residential structure is insurable property
if:
(1) the residential structure is not:
(A) a condominium, apartment, duplex, or other
multifamily residence; or
(B) a hotel or resort facility;
(2) the residential structure is located within an
area designated as a unit under the Coastal Barrier Resources Act
(Pub. L. No. 97-348); and
(3) a building permit or plat for the residential
structure was filed with the municipality, the county, or the
United States Army Corps of Engineers before June 11, 2003.
SECTION 1.04. Section 2210.053(b), Insurance Code, is
amended to read as follows:
(b) The department may develop programs to improve the
efficient operation of the association, including a program for
approving policy forms under Section 2301.010 and a program
designed to create incentives for insurers to write:
(1) windstorm and hail insurance voluntarily to cover
property located in a catastrophe area, especially property located
on the barrier islands of this state; and
(2) residential property insurance in this state.
SECTION 1.05. Section 2210.151, Insurance Code, is amended
to read as follows:
Sec. 2210.151. ADOPTION OF PLAN OF OPERATION. With the
advice of the board of directors, the commissioner by rule shall
adopt the plan of operation to provide Texas windstorm and hail
insurance in a catastrophe area. The plan must include provisions
to implement Subchapter E-1 in accordance with Section 2210.2253.
SECTION 1.06. Chapter 2210, Insurance Code, is amended by
adding Subchapter E-1 to read as follows:
SUBCHAPTER E-1. RESIDENTIAL PROPERTY INSURANCE COVERAGE
Sec. 2210.2251. APPLICABILITY OF SUBCHAPTER. (a) This
subchapter applies only to residential property insurance in this
state.
(b) To the extent of any conflict with another provision of
this chapter in relation to residential property insurance, this
subchapter controls.
Sec. 2210.2252. ESTABLISHMENT OF RESIDENTIAL PROPERTY
INSURANCE PLAN. The commissioner may establish a residential
property insurance plan operated by the association to issue and
deliver residential property insurance to residents of this state
in underserved areas if the commissioner determines, after a public
hearing, that in all or any part of the state, residential property
insurance is not reasonably available in the voluntary market to a
substantial number of insurable risks.
Sec. 2210.2253. PROVISIONS OF PLAN OF OPERATION RELATED TO
RESIDENTIAL PROPERTY INSURANCE POLICIES. The plan of operation
with respect to this subchapter must:
(1) provide for the issuance of residential property
insurance under this Chapter and distribute the losses and expenses
in writing that insurance in this state;
(2) provide that all insurers that write residential
property insurance shall participate in the association in the
accordance with Section 2210.2256(b);
(3) provide that a participating insurer is entitled
to receive credit in accordance with Section 2210.2256(c);
(4) provide for the immediate binding of eligible
risks;
(5) provide for the use of premium installment payment
plans, adequate marketing, and service facilities;
(6) provide for the establishment of reasonable
service standards;
(7) provide procedures for efficient, economical,
fair, and nondiscriminatory administration of the association;
(8) provide procedures for determining the net level
of participation required for each insurer in the association;
(9) provide for the use of deductibles and other
underwriting devices;and
(10) provide any other procedure or operational matter
the governing committee or the commissioner considers necessary.
Sec. 2210.2254. ASSOCIATION DUTIES WITH RESPECT TO
RESIDENTIAL PROPERTY INSURANCE POLICIES. (a) The association
may, for residential property insurance policies only:
(1) issue insurance policies and endorsements to those
policies in the association's own name or a trade name adopted for
that purpose.
Sec. 2210.2255. FILING AND APPROVAL OF RATES. (a) The
association shall file with the commissioner for approval the
proposed rates and supplemental rate information to be used in
connection with the issuance of insurance policies or endorsements
under this Chapter.
Sec. 2210.2256. COVERAGE PROVIDED TO INSUREDS IN
UNDERSERVED AREA. (a) In accordance with the plan of operation
and Sections 2210.051 and 2210.052, the association shall develop
and administer a program under this Chapter for membership in the
association of and participation by each insurer that writes
residential property insurance in this state.
(b) An insurer's participation in the association's
assessments under this Chapter must be determined in accordance
with the residential property statistical plan adopted by the
commissioner.
(c) A participating insurer is entitled to receive credit
for similar insurance voluntarily written in an underserved area.
The participation of an insurer entitled to receive credit under
this subsection must be reduced in accordance with the plan of
operation.
Sec. 2210.2257. MANDATORY COVERAGE PROVIDED TO CERTAIN
INSUREDS. The association shall make residential property
insurance available to each applicant in an underserved area whose
property is insurable in accordance with reasonable underwriting
standards but who, after diligent efforts, is unable to obtain
residential property insurance through the voluntary market, as
evidenced by two declinations from insurers authorized to engage in
the business of, and writing, residential property insurance in
this state.
SECTION 1.07. Section 2210.571(1), Insurance Code, is
amended to read as follows:
(1) "Association policy" means a windstorm and hail
insurance policy or a residential property
insurance policy issued by the association.
Sec. 2210.2258. DESIGNATION OF AREA AS UNDERSERVED. The
commissioner by rule shall designate the areas determined to be
underserved. In determining which areas to designate as
underserved, the commissioner shall consider the factors specified
in Section 2004.002.
Sec. 2210.2259. PROPERTY INSPECTION. (a) A person who has
an insurable interest in real or tangible personal property at a
fixed location in an underserved area and who, after diligent
effort, is unable to obtain residential property insurance, as
evidenced by two current declinations from insurers authorized to
engage in the business of residential property insurance in this
state and actually writing residential property insurance in this
state, is entitled on application to the association to an
inspection and evaluation of the property by representatives of the
association.
(b) A general property and casualty agent or personal lines
property and casualty agent may make an application on behalf of the
applicant. The applicant or agent must submit the application on a
form prescribed by the association.
(1) (c) Promptly after the application is received,
the association shall make an inspection and
prepare an inspection report. The inspection
report must be made available to the applicant on
request. The association shall prescribe the
manner and scope of the inspection and inspection
report for residential property in accordance
with the plan of operation.
SECTION 1.08. Section 2210.601, Insurance Code, is amended
to read as follows:
Sec. 2210.601. PURPOSE. The legislature finds that
authorizing the issuance of public securities to provide a method
to raise funds to provide windstorm and hail insurance and
residential property insurance through the association in certain
designated portions of the state is for the benefit of the public
and in furtherance of a public purpose.
ARTICLE 2. CONFORMING AMENDMENTS
SECTION 2.01. Section 38.002(a)(1), Insurance Code, is
amended to read as follows:
(1) "Insurer" means an insurance company, reciprocal
or interinsurance exchange, mutual insurance company, capital
stock company, county mutual insurance company, Lloyd's plan, or
other legal entity engaged in the business of personal automobile
insurance or residential property insurance in this state. The
term includes:
(A) an affiliate as described by Section 823.003(a) if
that affiliate is authorized to write and is writing personal
automobile insurance or residential property insurance in this
state;
(B) the Texas Windstorm Insurance Association
created and operated under Chapter 2210; and
(C) [the FAIR Plan Association under Chapter
2211; and]
[(D)] the Texas Automobile Insurance Plan
Association under Chapter 2151.
SECTION 2.02. Section 542A.001(4), Insurance Code, is
amended to read as follows:
(4) "Insurer" means a corporation, association,
partnership, or individual, other than the Texas Windstorm
Insurance Association, engaged as a principal in the business of
insurance and authorized or eligible to write property insurance in
this state, including:
(A) an insurance company;
(B) a reciprocal or interinsurance exchange;
(C) a mutual insurance company;
(D) a capital stock insurance company;
(E) a county mutual insurance company;
(F) a farm mutual insurance company;
(G) a Lloyd's plan; or
(H) an eligible surplus lines insurer[; or
[(I) the FAIR Plan Association, unless a claim
related dispute resolution procedure is available to policyholders
under Chapter 2211].
SECTION 2.03. Section 544.301(1), Insurance Code, is
amended to read as follows:
(1) "Insurer" means an insurance company, reciprocal
or interinsurance exchange, mutual insurance company, capital
stock company, county mutual insurance company, farm mutual
insurance company, Lloyd's plan, or other legal entity authorized
to write residential property insurance in this state. The term
includes an affiliate, as described by Section 823.003(a), if that
affiliate is authorized to write and is writing residential
property insurance in this state. The term does not include:
(A) an eligible surplus lines insurer regulated
under Chapter 981; or
(B) the Texas Windstorm Insurance Association
under Chapter 2210[; or
[(C) the FAIR Plan Association under Chapter 2211].
SECTION 2.04. Section 544.352(2), Insurance Code, is
amended to read as follows:
(2) "Insurer" means an insurance company,
reciprocal or interinsurance exchange, mutual insurance company,
capital stock company, county mutual insurance company, farm mutual
insurance company, association, Lloyd's plan, or other entity
authorized to write residential property insurance in this state.
The term includes an affiliate, as described by Section 823.003(a),
if that affiliate is authorized to write and is writing residential
property insurance in this state. The term does not include[:]
[(A)] the Texas Windstorm Insurance Association
created and operated under Chapter 2210[; or
[(B) the FAIR Plan created and operated under
Chapter 2211].
SECTION 2.05. Section 560.001, Insurance Code, is amended
to read as follows:
Sec. 560.001. DEFINITION OF INSURER. In this chapter,
"insurer" means an insurance company, reciprocal or interinsurance
exchange, mutual insurance company, farm mutual insurance company,
capital stock insurance company, county mutual insurance company,
Lloyd's plan, surplus lines insurer, or other legal entity engaged
in the business of insurance in this state. The term includes:
(1) an affiliate described by Section 823.003(a);
(2) the Texas Windstorm Insurance Association
established under Chapter 2210; and
(3) [the FAIR Plan Association established under
Chapter 2211; and
[(4)] the Texas Automobile Insurance Plan Association
established under Chapter 2151.
SECTION 2.06. Section 1811.001(6), Insurance Code, is
amended to read as follows:
(6) "Insurer" means a company or insurance carrier
that is engaged in the business of making property or casualty
insurance contracts. The term includes:
(A) a stock fire or casualty insurance company;
(B) a mutual fire or casualty insurance company;
(C) a Mexican casualty insurance company;
(D) a Lloyd's plan;
(E) a reciprocal or interinsurance exchange;
(F) a county mutual insurance company;
(G) a farm mutual insurance company;
(H) a risk retention group;
(I) the Medical Liability Insurance Joint
Underwriting Association under Chapter 2203;
(J) the Texas Windstorm Insurance Association
under Chapter 2210;
(K) [the FAIR Plan Association under Chapter
2211;]
[(L)] an eligible surplus lines insurer; and
(L) [(M)] any other insurer authorized to write
property or casualty insurance in this state.
SECTION 2.07. Section 2254.001(1), Insurance Code, is
amended to read as follows:
(1) "Insurer" means an insurance company, reciprocal
or inter insurance exchange, mutual insurance company, capital
stock company, county mutual insurance company, Lloyd's plan, or
other legal entity authorized to write residential property
insurance or personal automobile insurance in this state. The term
includes an affiliate, as described by this code, that is
authorized to write residential property insurance. The terms does
not include[:]
[(A)] the Texas Windstorm Insurance Association
under Chapter 2210[; or]
[(B) the FAIR Plan Association under Chapter
2211].
ARTICLE 3. REPEALER
SECTION 3.01. Effective January 1, 2020, Chapter 2211,
Insurance Code, is repealed.
ARTICLE 4. TRANSITIONS
SECTION 4.01. On January 1, 2020, the operations and
administration of business of the Fair Access to Insurance
Requirements Plan, including claims handling, are transferred to
the Texas Windstorm Insurance Association. A policy delivered,
issued for delivery, or renewed by the plan before January 1, 2020,
remains in force until the expiration of the policy period or until
the policy is otherwise terminated and all premium and other
amounts due under the policy are payable to the association instead
of the plan but are otherwise payable under the terms of the
policies. Money collected by the association under this section
must be used for the payment of claims and other expenses and the
satisfaction of bond obligations to the same extent as if it had
been collected by the Fair Access to Insurance Requirements Plan
under Chapter 2211, Insurance Code, as it existed before repeal by
this Act. In operating and administering the business of the plan,
the association shall, to the greatest extent possible, preserve
the rights of policyholders under policies in effect before January
1, 2020, under:
(1) the terms of the policies; and
(2) Chapter 2211, Insurance Code, and the plan of
operation of the plan as they existed before the effective date of
this Act.
SECTION 4.02. All money, property, contracts, leases,
rights, accounts payable and receivable, debts, and obligations of
the Fair Access to Insurance Requirements Plan are transferred to
the Texas Windstorm Insurance Association.
SECTION 4.03. (a) All money collected or held for the
satisfaction of bond obligations, if any, incurred under Chapter
2211, Insurance Code, as that chapter existed immediately before
the effective date of this Act, including money held in the Texas
Treasury Safekeeping Trust Company, shall be used to satisfy the
bond obligations for which the money is held or collected and
related expenses.
(b) Subchapter E, Chapter 2211, Insurance Code, as it
existed before the effective date of this Act, is applicable to bond
obligations incurred under Chapter 2211, Insurance Code, before the
effective date of this Act, except that the Texas Windstorm
Insurance Association shall act in lieu of the Fair Access to
Insurance Requirements Plan under that subchapter and any amount
required to be collected under that subchapter from a policyholder
of the Fair Access to Insurance Requirements Plan shall be
collected from a residential property insurance policyholder of the
Texas Windstorm Insurance Association. Subchapter E, Chapter 2211,
Insurance Code, as it existed before the effective date of this Act,
is continued in effect for that purpose.
SECTION 4.04. The transfer of the assets and obligations of
the Fair Access to Insurance Requirements Plan may not diminish or
impair the rights of a holder of an outstanding bond or other
obligation of the plan.
SECTION 4.05. All complaint, investigation, legal, or other
proceedings involving the Fair Access to Insurance Requirements
Plan pending on January 1, 2020, are transferred to the Texas
Windstorm Insurance Association, and, as necessary, the
association shall be substituted for the plan as a party to a
proceeding.
SECTION 4.06. (a) The governing committee of the Fair
Access to Insurance Requirements Plan established under Section
2211.052, Insurance Code, as that section existed before repeal by
this Act, is abolished effective January 1, 2020.
(b) The term of a person who is serving as a member of the
governing committee of the Fair Access to Insurance Requirements
Plan immediately before the abolition of that committee under
Subsection (a) of this section expires on January 1, 2020.
(c) The provisions of the plan of operation adopted under
Subchapter E-1, Chapter 2210, Insurance Code, as added by this Act,
must provide that the Texas Windstorm Insurance Association issue
residential property insurance policies under that chapter not
later than January 1, 2020.
(d) The commissioner of insurance shall adopt rules
necessary to ensure that the Texas Windstorm Insurance Association
issue residential property insurance policies under Subchapter
E-1, Chapter 2210, Insurance Code, as added by this Act, not later
than January 1, 2020.
SECTION 4.07. A reference in law to the Texas FAIR plan
association or the Fair Access to Insurance Requirements Plan means
the Texas Windstorm Insurance Association.
SECTION 4.08. This Act takes effect September 1, 2019.