TX
Texas House Bill HB2547

Texas 2021 - 87th Regular

Texas House Bill HB2547 Compare Versions

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1-87R17281 MWC-F
21 By: Oliverson H.B. No. 2547
3- Substitute the following for H.B. No. 2547:
4- By: Oliverson C.S.H.B. No. 2547
52
63
74 A BILL TO BE ENTITLED
85 AN ACT
9- relating to the regulation of commercial property and casualty
10- insurance and insurance for certain large risks.
6+ relating to the modernization of regulation of commercial property
7+ and casualty insurance.
118 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
12- SECTION 1. Section 981.004, Insurance Code, is amended by
13- adding Subsection (g) to read as follows:
14- (g) Except with respect to a line of insurance for which the
15- commissioner has temporarily reinstated the requirements for rate
16- and form filings under Section 2251.0031(d) or 2301.0031(d),
17- Subsections (a)(1) and (b) do not apply to an insurance policy
18- issued by an eligible surplus lines insurer for any line of the
19- kinds of insurance described by Sections 2251.0031(a) and
20- 2301.0031(a) or exempted under Section 2251.0031(c) or
21- 2301.0031(c).
22- SECTION 2. Section 2251.003(b), Insurance Code, is amended
23- to read as follows:
24- (b) Except as provided by Section 2251.0031, this [This]
9+ SECTION 1. Section 2251.002, Insurance Code, is amended to
10+ read as follows:
11+ Section 2251.002. DEFINITIONS. In this chapter:
12+ (1) "Commercial property insurance" means insurance
13+ coverage against loss caused by or resulting from loss, damage, or
14+ destruction of real or personal property provided through a
15+ commercial property insurance policy. The term includes any
16+ combination of:
17+ (A) commercial fire or allied lines;
18+ (B) commercial inland marine insurance;
19+ (C) commercial crime coverage;
20+ (D) boiler and machinery insurance other than explosion;
21+ (E) glass insurance provided as part of other coverage; and
22+ (F) as authorized by commissioner rule, insurance covering
23+ other perils or providing other coverages or other lines of first
24+ party property insurance.
25+ (1-a) "Disallowed expenses" includes:
26+ (A) administrative expenses, other than acquisition, loss
27+ control, and safety engineering expenses, that exceed 110 percent
28+ of the industry median for those expenses;
29+ (B) lobbying expenses;
30+ (C) advertising expenses, other than for advertising:
31+ (i) directly related to the services or products provided by
32+ the insurer; or
33+ (ii) designed and directed at loss prevention;
34+ (D) amounts paid by an insurer:
35+ (i) as damages in an action brought against the insurer for
36+ bad faith, fraud, or any matters other than payment under the
37+ insurance contract; or
38+ (ii) as fees, fines, penalties, or exemplary damages for a
39+ civil or criminal violation of law;
40+ (E) contributions to:
41+ (i) social, religious, political, or fraternal
42+ organizations; or
43+ (ii) organizations engaged in legislative advocacy;
44+ (F) except as authorized by commissioner rule, fees and
45+ assessments paid to advisory organizations;
46+ (G) any amount determined by the commissioner to be excess
47+ premiums charged by the insurer; and
48+ (H) any unreasonably incurred expenses, as determined by
49+ the commissioner after notice and hearing.
50+ (2) "Filer" means an insurer that files rates, prospective
51+ loss costs, or supplementary rating information under this chapter.
52+ (2-a) "Highly protected commercial property" is defined as
53+ property that is judged to be subject to a much lower than normal
54+ probability of loss by virtue of low hazard occupancy or property
55+ type, superior construction, special fire protection equipment and
56+ procedures, and management commitment to loss prevention.
57+ (3) "Prospective loss cost" means that portion of a rate
58+ that:
59+ (A) does not include a provision for expenses or profit,
60+ other than loss adjustment expenses; and
61+ (B) is based on historical aggregate losses and loss
62+ adjustment expenses projected by development to the ultimate value
63+ of those losses and expenses and projected through trending to a
64+ future point in time.
65+ (4) "Rate" means the cost of insurance per exposure unit,
66+ whether expressed as a single number or as a prospective loss cost,
67+ adjusted to account for the treatment of expenses, profit, and
68+ individual insurer variation in loss experience, before applying
69+ individual risk variations based on loss or expense considerations.
70+ (5) "Rating manual" means a publication or schedule that
71+ lists rules, classifications, territory codes and descriptions,
72+ rates, premiums, and other similar information used by an insurer
73+ to determine the applicable premium charged an insured.
74+ (6) "Residential property insurance" means insurance
75+ coverage against loss to real or tangible personal property at a
76+ fixed location that is provided through a homeowners insurance
77+ policy, including a tenants insurance policy, a condominium owners
78+ insurance policy, or a residential fire and allied lines insurance
79+ policy.
80+ (7) "Supplementary rating information" means any manual,
81+ rating schedule, plan of rules, rating rules, classification
82+ systems, territory codes and descriptions, rating plans, and other
83+ similar information used by the insurer to determine the applicable
84+ premium for an insured. The term includes factors and
85+ relativities, including increased limits factors, classification
86+ relativities, deductible relativities, premium discount, and other
87+ similar factors and rating plans such as experience, schedule, and
88+ retrospective rating.
89+ (8) "Supporting information" means:
90+ (A) the experience and judgment of the filer and the
91+ experience or information of other insurers or advisory
92+ organizations on which the filer relied;
93+ (B) the interpretation of any other information on which the
94+ filer relied;
95+ (C) a description of methods used in making a rate; and
96+ (D) any other information the department receives from a
97+ filer as a response to a request under Section 38.001.
98+ SECTION 2. Section 2251.003, Insurance Code, is amended to
99+ read as follows:
100+ Sec. 2251.003. APPLICABILITY OF CERTAIN SUBCHAPTERS. (a)
101+ This subchapter and Subchapters B, C, and D apply to:
102+ (1) an insurer to which Article 5.13 applies, other than the
103+ Texas Windstorm Insurance Association, the FAIR Plan Association,
104+ and the Texas Automobile Insurance Plan Association; and
105+ (2) except as provided by Subsection (c), a Lloyd's plan,
106+ reciprocal or interinsurance exchange, and county mutual insurance
107+ company with respect to the lines of insurance described by
108+ Subsection (b).
109+ (b) Except as provided by Subsection (d), this[This]
25110 subchapter and Subchapters B, C, and D apply to all lines of the
26111 following kinds of insurance written under an insurance policy or
27112 contract issued by an insurer authorized to engage in the business
28113 of insurance in this state:
29114 (1) general liability insurance;
30115 (2) residential and commercial property insurance,
31116 including farm and ranch insurance and farm and ranch owners
32117 insurance;
33- (3) personal and commercial casualty insurance,
34- except as provided by Section 2251.004;
118+ (3) personal and commercial casualty insurance, except as
119+ provided by Section 2251.004;
35120 (4) medical professional liability insurance;
36121 (5) fidelity, guaranty, and surety bonds other than
37122 criminal court appearance bonds;
38123 (6) personal umbrella insurance;
39124 (7) personal liability insurance;
40125 (8) guaranteed auto protection (GAP) insurance;
41126 (9) involuntary unemployment insurance;
42127 (10) financial guaranty insurance;
43128 (11) inland marine insurance;
44129 (12) rain insurance;
45130 (13) hail insurance on farm crops;
46131 (14) personal and commercial automobile insurance;
47132 (15) multi-peril insurance; and
48- (16) identity theft insurance issued under Chapter
49- 706.
50- SECTION 3. Subchapter A, Chapter 2251, Insurance Code, is
51- amended by adding Section 2251.0031 to read as follows:
52- Sec. 2251.0031. EXCEPTIONS FOR CERTAIN LINES. (a) Except
53- as provided by Subsection (d), Subchapter C does not apply to any
54- line of the following kinds of insurance written under a commercial
55- insurance policy or contract issued by an insurer authorized to
56- engage in the business of insurance in this state:
133+ (16) identity theft insurance issued under Chapter 706.
134+ (c) Sections 2251.008, 2251.052, 2251.101, 2251.102,
135+ 2251.103, 2251.104, 2251.105, and 2251.107 do not apply to a
136+ Lloyd's plan or a reciprocal or interinsurance exchange with
137+ respect to commercial property insurance, inland marine insurance,
138+ rain insurance, or hail insurance on farm crops.
139+ (d) Except as provided by Subsection (e), Subchapter C does
140+ not apply to all lines of the following kinds of insurance written
141+ under a commercial insurance policy or contract issued by an
142+ insurer authorized to engage in the business of insurance in this
143+ state:
57144 (1) surety bonds;
58145 (2) fidelity bonds;
59146 (3) commercial inland marine;
60147 (4) boiler and machinery;
61148 (5) environmental impairment or pollution liability;
62149 (6) kidnap and ransom;
63150 (7) political risk or expropriation;
64- (8) commercial excess liability or umbrella
65- liability;
151+ (8) commercial excess liability or umbrella liability;
66152 (9) directors' and officers' liability;
67153 (10) fiduciary liability;
68154 (11) employment practices liability;
69- (12) errors and omission and professional liability
70- other than medical professional liability;
155+ (12) errors and omission and professional liability (other
156+ than medical professional liability);
71157 (13) media liability;
72158 (14) product liability, product recall, or completed
73159 operations;
74- (15) commercial cybersecurity, including first- and
75- third-party commercial lines coverage for losses arising out of or
160+ (15) commercial cybersecurity, including first and third
161+ party commercial lines coverage for losses arising out of or
76162 relating to data privacy breaches, network security, computer
77163 viruses, and similar exposures;
78164 (16) highly protected commercial property;
79- (17) commercial flood insurance not provided through
80- the National Flood Insurance Program; or
81- (18) any combination of only the kinds of insurance
82- listed in this subsection or exempted under Subsection (c).
83- (b) For purposes of Subsection (a), "highly protected
84- commercial property" is commercial property that is subject to a
85- much lower than normal probability of loss due to low-hazard
86- occupancy or property type, superior construction, special fire
87- protection equipment and procedures, and management commitment to
88- loss prevention.
89- (c) The commissioner by rule may exempt a commercial line of
90- insurance or commercial risk not listed in Subsection (a) from the
91- rate filing requirements of Subchapter C to promote enhanced
92- competition or more effectively use the resources of the department
93- that might otherwise be used to review commercial lines filings.
94- (d) Notwithstanding Subsection (a), the commissioner may
95- temporarily require rate filings under Subchapter C for a specific
96- kind of insurance listed in Subsection (a) for a period of not
97- longer than one year if, after notice and hearing, the commissioner
98- issues an order that:
99- (1) includes a finding that a reasonable degree of
100- competition does not exist for that specific kind of insurance; and
101- (2) specifies the relevant tests and test results used
102- to determine the degree of competition for that kind of insurance.
103- (e) In the absence of a finding described by Subsection (d)
104- with respect to a specific kind of insurance, a competitive market
105- is presumed to exist for that kind of insurance.
165+ (17) commercial flood insurance (other than National Flood
166+ Insurance Program);
167+ (18) any other commercial lines insurance coverage or risk
168+ that the commissioner shall, by rule, exempt from rate filing
169+ requirements under Subchapter C in order to promote enhanced
170+ competition or to more effectively use the resources of the
171+ department that might otherwise be used to review commercial lines
172+ filings; and
173+ (19) any combination of only the kinds of insurance in this
174+ subsection.
175+ (e) The commissioner may temporarily reinstate, for a
176+ period of no longer than one year, the requirements for rate filings
177+ under Subchapter C for a specific insurance coverage specified
178+ under Subsection (d) if, after a hearing, the commissioner makes a
179+ finding of fact that a reasonable degree of competition does not
180+ exist for that specific type of insurance coverage. Such a finding
181+ of fact by the commissioner must specify the relevant tests used to
182+ determine whether a lack of a reasonable degree of competition
183+ exists and the results thereof. In the absence of such specific
184+ findings of fact by the commissioner, a competitive market is
185+ presumed to exist.
106186 (f) The commissioner may adopt reasonable and necessary
107187 rules to implement this section.
108- SECTION 4. Section 2251.101, Insurance Code, is amended by
109- adding Subsection (c) to read as follows:
110- (c) This section does not apply to rates for use with an
188+ (g) Section 2251.101 does not apply to rates for use with an
111189 insured that has:
112190 (1) total insured property values of $5 million or
113191 more;
114192 (2) total annual gross revenues of $10 million or
115193 more; or
116194 (3) a total premium of $25,000 or more for property
117195 insurance, $25,000 or more for general liability insurance, or
118- $50,000 or more for multi-peril insurance.
119- SECTION 5. Section 2301.003(b), Insurance Code, is amended
120- to read as follows:
121- (b) Except as provided by Section 2301.0031, this [This]
196+ $50,000 or more for multiperil insurance.
197+ SECTION 3. Section 2251.003(d), Insurance Code, as added by
198+ this Act, applies only to an insurance policy delivered, issued for
199+ delivery, or renewed on or after September 1, 2021. A policy
200+ delivered, issued for delivery, or renewed before September 1,
201+ 2021, is governed by the law as it existed immediately before the
202+ effective date of this Act, and that law is continued in effect for
203+ that purpose.
204+ SECTION 4. Section 2301.002, Insurance Code, is amended to
205+ read as follows:
206+ Sec. 2301.002. DEFINITIONS. In this subchapter:
207+ (1) "Commercial property insurance" means insurance
208+ coverage against loss caused by or resulting from loss, damage, or
209+ destruction of real or personal property provided through a
210+ commercial property insurance policy. The term includes any
211+ combination of:
212+ (A) commercial fire or allied lines;
213+ (B) commercial inland marine insurance;
214+ (C) commercial crime coverage;
215+ (D) boiler and machinery insurance other than explosion;
216+ (E) glass insurance provided as part of other coverage; and
217+ (F) as authorized by commissioner rule, insurance covering
218+ other perils or providing other coverages or other lines of first
219+ party property insurance.
220+ (1-a) "Form" means an insurance policy form or a printed
221+ endorsement form.
222+ (1-b) "Highly protected commercial property" is defined as
223+ property that is judged to be subject to a much lower than normal
224+ probability of loss by virtue of low hazard occupancy or property
225+ type, superior construction, special fire protection equipment and
226+ procedures, and management commitment to loss prevention.
227+ (2) "Residential property insurance" means insurance
228+ coverage against loss to real or tangible personal property at a
229+ fixed location that is provided through a homeowners insurance
230+ policy, including a tenants insurance policy, a condominium owners
231+ insurance policy, or a residential fire and allied lines insurance
232+ policy.
233+ (3) "Supporting information" means any information required
234+ by the department to be filed.
235+ SECTION 5. Section 2301.003, Insurance Code, is amended to
236+ read as follows:
237+ Sec. 2301.003. APPLICABILITY OF SUBCHAPTER. (a) This
238+ subchapter applies to:
239+ (1) an insurer to which Article 5.13 applies, other than the
240+ Texas Windstorm Insurance Association, the FAIR Plan Association,
241+ and the Texas Automobile Insurance Plan Association; and
242+ (2) except as provided by Subsections (c) and (d), a Lloyd's
243+ plan, reciprocal or interinsurance exchange, and county mutual
244+ insurance company with respect to the lines of insurance described
245+ by Subsection (b).
246+ (b) Except as provided in Subsection (e), this[This]
122247 subchapter applies to all lines of the following kinds of insurance
123248 written under an insurance policy or contract issued by an insurer
124249 authorized to engage in the business of insurance in this state:
125250 (1) general liability insurance;
126251 (2) residential and commercial property insurance,
127252 including farm and ranch insurance and farm and ranch owners
128253 insurance;
129- (3) personal and commercial casualty insurance,
130- except as provided by Section 2301.005;
254+ (3) personal and commercial casualty insurance, except as
255+ provided by Section 2301.005;
131256 (4) medical professional liability insurance;
132257 (5) fidelity, guaranty, and surety bonds other than
133258 criminal court appearance bonds;
134259 (6) personal umbrella insurance;
135260 (7) personal liability insurance;
136261 (8) guaranteed auto protection (GAP) insurance;
137262 (9) involuntary unemployment insurance;
138263 (10) financial guaranty insurance;
139264 (11) inland marine insurance;
140265 (12) rain insurance;
141266 (13) hail insurance on farm crops;
142267 (14) personal and commercial automobile insurance;
143268 (15) multi-peril insurance; and
144- (16) identity theft insurance issued under Chapter
145- 706.
146- SECTION 6. Subchapter A, Chapter 2301, Insurance Code, is
147- amended by adding Section 2301.0031 to read as follows:
148- Sec. 2301.0031. EXCEPTIONS FOR CERTAIN LINES. (a) Except
149- as provided by Subsection (d), Sections 2301.006, 2301.007(a) and
150- (b), and 2301.008 do not apply to any line of the following kinds of
151- insurance written under a commercial insurance policy or contract
152- issued by an insurer authorized to engage in the business of
153- insurance in this state:
269+ (16) identity theft insurance issued under Chapter 706.
270+ (c) Section 2301.009 does not apply to a Lloyd's plan or a
271+ reciprocal or interinsurance exchange with respect to commercial
272+ property insurance.
273+ (d) This subchapter does not apply to a Lloyd's plan or
274+ reciprocal or interinsurance exchange with respect to inland marine
275+ insurance, rain insurance, or hail insurance on farm crops.
276+ (e) Except as provided by Subsection (f), Sections
277+ 2301.006, 2301.007(a) and (b), and 2301.008 do not apply to all
278+ lines of the following kinds of insurance written under a
279+ commercial insurance policy or contract issued by an insurer
280+ authorized to engage in the business of insurance in this state:
154281 (1) surety bonds;
155282 (2) fidelity bonds;
156283 (3) commercial inland marine;
157284 (4) boiler and machinery;
158285 (5) environmental impairment or pollution liability;
159286 (6) kidnap and ransom;
160287 (7) political risk or expropriation;
161- (8) commercial excess liability or umbrella
162- liability;
288+ (8) commercial excess liability or umbrella liability;
163289 (9) directors' and officers' liability;
164290 (10) fiduciary liability;
165291 (11) employment practices liability;
166- (12) errors and omission and professional liability
167- other than medical professional liability;
292+ (12) errors and omission and professional liability (other
293+ than medical professional liability);
168294 (13) media liability;
169295 (14) product liability, product recall, or completed
170296 operations;
171- (15) commercial cybersecurity, including first- and
172- third-party commercial lines coverage for losses arising out of or
173- relating to data privacy breaches, network security, computer
174- viruses, and similar exposures;
297+ (15) cybersecurity, including first and third party
298+ commercial lines coverage for losses arising out of or relating to
299+ data privacy breaches, network security, computer viruses, and
300+ similar exposures;
175301 (16) highly protected commercial property;
176- (17) commercial flood insurance not provided through
177- the National Flood Insurance Program; or
178- (18) any combination of only the kinds of insurance
179- listed in this subsection or exempted under Subsection (c).
180- (b) For purposes of Subsection (a), "highly protected
181- commercial property" is commercial property that is subject to a
182- much lower than normal probability of loss due to low-hazard
183- occupancy or property type, superior construction, special fire
184- protection equipment and procedures, and management commitment to
185- loss prevention.
186- (c) The commissioner by rule may exempt a commercial line of
187- insurance or commercial risk not listed in Subsection (a) from the
188- form filing requirements of this subchapter to promote enhanced
189- competition or more effectively use the resources of the department
190- that might otherwise be used to review commercial lines filings.
191- (d) Notwithstanding Subsection (a), the commissioner may
192- temporarily impose the requirements of Sections 2301.006,
193- 2301.007(a) and (b), and 2301.008 for a specific kind of insurance
194- listed in Subsection (a) for a period of not longer than one year
195- if, after notice and hearing, the commissioner issues an order
196- that:
197- (1) includes a finding that a reasonable degree of
198- competition does not exist for that specific kind of insurance; and
199- (2) specifies the relevant tests and test results used
200- to determine the degree of competition for that kind of insurance.
201- (e) In the absence of a finding described by Subsection (d)
202- with respect to a specific kind of insurance, a competitive market
203- is presumed to exist for that kind of insurance.
204- (f) The commissioner may adopt reasonable and necessary
302+ (17) commercial flood insurance (other than National Flood
303+ Insurance Program);
304+ (18) any other commercial lines insurance coverage or risk
305+ that the commissioner shall, by rule, exempt from policy form
306+ filing requirements under this subchapter in order to promote
307+ enhanced competition or to more effectively use the resources of
308+ the department that might otherwise be used to review commercial
309+ lines filings; and
310+ (19) any combination of only the kinds of insurance in this
311+ subsection.
312+ (f) The commissioner may temporarily reinstate, for a
313+ period of no longer than one year, the requirements of sections
314+ 2301.006, 2301.007(a) and (b), and 2301.008 for a specific
315+ insurance coverage specified under Subsection (e) if, after a
316+ hearing, the commissioner makes a finding of fact that a reasonable
317+ degree of competition does not exist for that specific type of
318+ insurance coverage. Such a finding of fact by the commissioner must
319+ specify the relevant tests used to determine whether a lack of a
320+ reasonable degree of competition exists and the results thereof.
321+ In the absence of such specific findings of fact by the
322+ commissioner, a competitive market is presumed to exist.
323+ (g) The commissioner may adopt reasonable and necessary
205324 rules to implement this section.
206- SECTION 7. The changes in law made by this Act apply only to
207- an insurance policy that is delivered, issued for delivery, or
208- renewed on or after September 1, 2021. An insurance policy
209- delivered, issued for delivery, or renewed before September 1,
210- 2021, is governed by the law as it existed immediately before the
211- effective date of this Act, and that law is continued in effect for
212- that purpose.
213- SECTION 8. This Act takes effect September 1, 2021.
325+ SECTION 6. Section 981.004, Insurance Code, is amended to
326+ read as follows:
327+ Sec. 981.004. SURPLUS LINES INSURANCE AUTHORIZED. (a) An
328+ eligible surplus lines insurer may provide surplus lines insurance
329+ only if:
330+ (1) the full amount of required insurance cannot be
331+ obtained, after a diligent effort, from an insurer authorized to
332+ write and actually writing that kind and class of insurance in this
333+ state;
334+ (2) the insurance is placed through a surplus lines
335+ agent; and
336+ (3) the insurer meets the eligibility requirements of
337+ Subchapter B or B-1 as of the inception date and annual anniversary
338+ date of each insurance contract, cover note, or other confirmation
339+ of insurance.
340+ (b) An eligible surplus lines insurer may provide surplus
341+ lines insurance only in the amount that exceeds the amount of
342+ insurance obtainable from authorized insurers.
343+ (c) Subsection (a)(1) does not apply to insurance procured
344+ for an exempt commercial purchaser if:
345+ (1) the agent procuring or placing the insurance
346+ discloses to the exempt commercial purchaser that:
347+ (A) comparable insurance may be available from
348+ the admitted market that is subject to more regulatory oversight
349+ than the surplus lines market; and
350+ (B) a policy purchased in the admitted market may
351+ provide greater protection than the surplus lines insurance policy;
352+ and
353+ (2) after receiving the notice described by
354+ Subdivision (1), the exempt commercial purchaser requests in
355+ writing that the agent procure the insurance from or place the
356+ insurance with an eligible surplus lines insurer.
357+ (d) Subsection (a)(1) does not apply to insurance procured
358+ for an industrial insured if:
359+ (1) the agent procuring or placing the insurance
360+ discloses to the industrial insured that:
361+ (A) comparable insurance may be available from
362+ the admitted market that is subject to more regulatory oversight
363+ than the surplus lines market; and
364+ (B) a policy purchased in the admitted market may
365+ provide greater protection than the surplus lines insurance policy;
366+ (2) the surplus lines company offering the coverage
367+ has a financial strength rating of A- or better from the A. M. Best
368+ Company; and
369+ (3) after receiving the notice described by
370+ Subdivision (1), the industrial insured requests in writing that
371+ the agent procure the insurance from or place the insurance with an
372+ eligible surplus lines insurer.
373+ (e) Notwithstanding Subsection (a)(1), the availability of
374+ windstorm and hail insurance from the Texas Windstorm Insurance
375+ Association does not preclude an eligible surplus lines insurer
376+ from providing windstorm and hail insurance under Subsection (a) or
377+ limiting the amount of insurance that may be provided under
378+ Subsection (b).
379+ (f) Except with respect to any line of insurance and during
380+ any period of time for which the commissioner has temporarily
381+ reinstated the requirements for rate and form filings under Sec.
382+ 2251.003(e) and Sec. 2301.003(f), Subsection (a)(1) and Subsection
383+ (b) do not apply to insurance procured in all lines of the kinds of
384+ insurance described in Section 2251.003(d) and 2301.003(e) and
385+ provided by an eligible surplus lines insurer.
386+ SECTION 7. This Act takes effect September 1, 2021.