By: Lozano H.B. No. 2880
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 A, Chapter 2210, Insurance Code, is
amended by adding Section 2210.016 to read as follows:
Sec. 2210.016. LEGISLATIVE LOBBYING. (a) The association
may not use any money under its control to attempt to influence the
passage or defeat of a legislative measure.
(b) An employee or board member that violates Subsection (a)
is subject to immediate termination and a fine of $10,000 to be
deposited in the catastrophe reserve trust fund.
(c) This section does not prohibit a member of the board of
directors or an employee from using money under its control to
provide public information or to provide information responsive to
a request.
SECTION 2. 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 shall be located in a first tier
coastal county or second tier coastal county.
SECTION 3. Subchapter B, Chapter 2210, Insurance Code, is
amended by adding Section 2210.064 to read as follows:
Sec. 2210.064. ASSOCIATION GENERAL MANAGER. (a) The
general manager of the association is responsible and accountable
to the commissioner and the board of directors.
(b) The general manager is appointed by the commissioner in
accordance with this section.
(c) The commissioner may remove an existing general manager
and appoint a new general manager at any time.
(d) The general manager must have demonstrated knowledge of
windstorm insurance, general business, or actuarial principles
sufficient to make the success of the association probable.
(e) A person may not serve as general manager of the
association if the person or the person's spouse:
(1) is employed by or participates in the management
of a business entity or other organization:
(A) operating in the property and casualty
insurance industry in this state;
(B) receiving money from the association, other
than insurance claim payments; or
(C) receiving money from association
policyholders with respect to the policyholders' claims;
(2) owns or controls, directly or indirectly, more
than a 10 percent interest in a business entity or other
organization:
(A) operating in the property and casualty
insurance industry in this state;
(B) receiving money from the association, other
than insurance claim payments; or
(C) receiving money from association
policyholders with respect to the policyholders' claims;
(3) uses or receives a substantial amount of tangible
goods, services, or money from the association, other than:
(A) insurance claim payments; or
(B) compensation or reimbursement authorized by
law for the general manager's membership, attendance, or expenses.
SECTION 4. Section 2210.0725(a), Insurance Code, is amended
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 plus an adjustment
equal to the Consumer Price Index for that catastrophe year.
SECTION 5. Section 2210.074(a), Insurance Code, is amended
to read as follows:
Sec. 2210.074. PAYMENT THROUGH CLASS 2 ASSESSMENTS. (a)
Losses in a catastrophe year not paid under Sections 2210.0715,
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
plus an adjustment equal to the Consumer Price Index for that
catastrophe year.
SECTION 6. Section 2210.0742(a), Insurance Code, is amended
to read as follows:
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 plus an adjustment equal to the Consumer
Price Index for that catastrophe year.
SECTION 7. Subchapter B-1, Chapter 2210, Insurance Code, is
amended by adding Section 2210.076 to read as follows:
Sec. 2210.076. PAYMENT FROM ASSESSMENTS IN EXCESS OF
REINSURANCE. (a) Losses in a catastrophe year not paid under
Sections 2210.0715, 2210.072, 2210.0725, 2210.073, 2210.074,
2210.0741, 2210.0742, 2210.4522, and 2210.453 shall be paid as
provided by this section from member assessments.
(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 2210.102, 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 members must be property and casualty agents who
are licensed under this code, are not captive agents, and
reside [representatives of the insurance industry who actively
write and renew windstorm and hail insurance] in the first tier
coastal counties.
(c) Three 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
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 must reside in an area of this state that
is located outside the first tier coastal counties[more than 100
miles from the Texas coastline].
(d-1) One of the members appointed under Subsection (d) must
be the public counsel of the Office of Public Insurance Counsel or
their designated appointee.
(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) No member may be an active employee of an insurer who is
a member of the association. [Insurers who are members of the
association shall nominate, from among those members, persons to
fill any vacancy in the three 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
appoint replacement insurance industry representatives from the
nominee slate.]
(g) Members appointed to the board of directors under
Subsections (c) and (d)[, other than the member appointed under
Subsection (c-1),] must represent the general public in the regions
described by those subsections. A person may not be appointed to
represent the general public under Subsection (c) or (d) if the
person or the person's spouse:
(1) is employed by or participates in the management
of a business entity or other organization:
(A) operating in the property and casualty
insurance industry in this state;
(B) receiving money from the association, other
than insurance claim payments; or
(C) receiving money from association
policyholders with respect to the policyholders' claims;
(2) owns or controls, directly or indirectly, more
than a 10 percent interest in a business entity or other
organization:
(A) operating in the property and casualty
insurance industry in this state;
(B) receiving money from the association, other
than insurance claim payments; or
(C) receiving money from association
policyholders with respect to the policyholders' claims; or
(3) uses or receives a substantial amount of tangible
goods, services, or money from the association, other than:
(A) insurance claim payments; or
(B) compensation or reimbursement authorized by
law for the board members' membership, attendance, or expenses.
SECTION 9. Section 2210.103, Insurance Code, is amended to
read as follows:
Sec. 2210.103. TERMS. (a) Members of the board of
directors serve three-year staggered terms, with the terms of three
members expiring on the third Tuesday of March of each year.
(b) A person may serve on the board of directors for not more
than three consecutive full terms, not to exceed nine years.
(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 Section 2210.102 for a member who
leaves or is removed from the board of directors.
(d) A member of the board of directors shall be removed by
the commissioner if the board member fails to make a reasonable
effort to attend the board meeting to set the annual rate,
described by Section 2210.352.
SECTION 10. Section 2210.105, Insurance Code, is amended by
amending (d) and adding (b-2) to read as follows:
(d) Except for an emergency meeting, a meeting of the board
of directors shall be held at a location in a first tier coastal
county or second tier coastal county [as determined by the board of
directors].
(b-2) A legislator or a legislator's designated
representative may attend a meeting of the board of directors or the
members of the association, including a closed meeting authorized
by Subchapter D, Chapter 551, Government Code.
SECTION 11. Subchapter G, Insurance Code, is amended by
adding Section 2210.211 to read as follows:
Sec. 2210.211. CERTAIN ADJUSTMENTS PROHIBITED. (a) The
association may not automatically adjust the amount of coverage to
be purchased by a policyholder.
(b) The association may not require the use of any one
replacement cost calculator.
(c) The association may not adjust premiums, fees, or any
other costs to policyholders for inflation without a vote by the
board of directors.
SECTION 12. Section 2210.352, Insurance Code, is amended to
read as follows:
Sec. 2210.352. MANUAL RATE FILINGS: ANNUAL FILING. (a) Not
later than September [August] 15 of each year, the association
shall file with the department a proposed manual rate for all types
and classes of risks written by the association.
SECTION 13. Section 2210.453(b), Insurance Code, is amended
to read as follows:
(b) The association shall maintain total available loss
funding in an amount not less than the probable maximum loss for the
association for a catastrophe year with a probability of one in 50
[100]. If necessary, the required funding level shall be achieved
through the purchase of reinsurance or the use of alternative
financing mechanisms, or both, to operate in addition to or in
concert with the trust fund, public securities, financial
instruments, and assessments authorized by this chapter.
SECTION 14. Section 2210.453, Insurance Code, is amended by
adding Subsections (b-1) and (b-2) to read as follows:
(b-1) In determining the probable maximum loss under
Subsection (b), the association:
(1) may not consider the cost of providing loss
adjustments;
(2) shall, to the extent possible, contract with any
disinterested third parties necessary to execute any catastrophe
models that were executed in the preceding storm season;
(3) shall, if the association is unable to contract
for the execution of a catastrophe model described by Subdivision
(2), contract with any disinterested third party necessary to
execute a catastrophe model that is substantially similar to the
model for which the association is unable to contract under
Subdivision (2);
(4) may contract with any disinterested third parties
to execute catastrophe models in addition to the models required by
Subdivisions (2) and (3);
(5) shall provide to a third party executing a
catastrophe model any information necessary to comply with this
subsection;
(6) may not use a combination of catastrophe models to
determine the probable maximum loss; and
(7) may use only the catastrophe model that produces
the lowest probable maximum loss.
(b-2) Any information produced in compliance with
Subsection (b-1) shall be made publicly available on the Internet
website of the association.
(b-3) The amount of loss adjustment expense, as adopted by
the board of directors for a catastrophe year and used for the
association's rate indication for purposes of filing a rate under
this Chapter, must be considered above the probable maximum loss.
SECTION 15. Section 2210.618, Insurance Code, is amended to
read as follows:
Sec. 2210.618. EXEMPTION FROM TAXATION. (a) A public
security issued under this subchapter, any transaction relating to
the public security, and profits made from the sale of the public
security are exempt from taxation by this state or by a municipality
or other political subdivision of this state.
(b) The association is not subject to any insurance premium
tax or insurance maintenance tax or fee.
SECTION 16. Section 2210.063, Insurance Code, as added by
this Act, applies to the Texas Windstorm Insurance Association
beginning on January 1, 2025.
SECTION 17. 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, 2023.