87R2261 SMT-D
By: Middleton H.B. No. 769
A BILL TO BE ENTITLED
AN ACT
relating to the administration of the Texas Windstorm Insurance
Association.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter B, Chapter 2210, Insurance Code, is
amended by adding Section 2210.063 to read as follows:
Sec. 2210.063. LOCATION OF ASSOCIATION HEADQUARTERS. The
headquarters of the association must be located in a first tier
coastal county or second tier coastal county.
SECTION 2. Subchapter H, Chapter 2210, Insurance Code, is
amended by adding Section 2210.3512 to read as follows:
Sec. 2210.3512. REQUIREMENT FOR VOTE ON RATE FILING. The
board of directors may not vote on a proposed rate filing if there
is a vacancy on the board.
SECTION 3. Section 2210.452(c), Insurance Code, is amended
to read as follows:
(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 or pay public security
obligations, giving priority to the obligations with the highest
interest rates [, 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].
SECTION 4. Subchapter J, Chapter 2210, Insurance Code, is
amended by adding Section 2210.4522 to read as follows:
Sec. 2210.4522. REINSURANCE REQUIRED. (a) Notwithstanding
any other provision of this chapter, a member insurer shall provide
to the association reinsurance in lieu of reinsurance purchased
under Section 2210.453 at no cost to the association. The
proportion of the losses that exceed the attachment point for the
provided reinsurance is calculated in the manner used to determine
each insurer's participation in the association for the year under
Section 2210.052.
(b) Except as provided by Subsection (c), a member insurer
may purchase reinsurance to cover the proportion of losses for
which the insurer is responsible under Subsection (a).
(c) A member insurer may not purchase reinsurance under this
section from an insurer that has prepared the risk model on which
the association relies in determining the probable maximum loss
applicable for the period covered by the reinsurance.
(d) A member insurer may not recoup losses incurred from
providing the reinsurance required in Subsection (a) through a
premium surcharge.
SECTION 5. Section 2210.453, Insurance Code, is amended by
adding Subsection (b-1) to read as follows:
(b-1) In determining the probable maximum loss under
Subsection (b), the association may not consider the cost of
providing loss adjustments.
SECTION 6. Section 2210.611, Insurance Code, is amended to
read as follows:
Sec. 2210.611. EXCESS REVENUE COLLECTIONS AND INVESTMENT
EARNINGS. Revenue collected in any calendar year from a premium
surcharge under Sections 2210.612, 2210.613, and 2210.6131 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 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 that would otherwise be required to be levied for the year
under this subchapter; or
(2) used to redeem or purchase outstanding public
securities [; or
[(3) deposited in the catastrophe reserve trust fund].
SECTION 7. Sections 2210.453(d) and (e), Insurance Code,
are repealed.
SECTION 8. Section 2210.063, Insurance Code, as added by
this Act, applies to the Texas Windstorm Insurance Association
beginning on January 1, 2022.
SECTION 9. The Texas Windstorm Insurance Association shall
amend the association's plan of operation to conform to the changes
in law made by this Act not later than the 60th day after the
effective date of this Act.
SECTION 10. This Act takes effect September 1, 2021.