Texas 2023 - 88th Regular

Texas Senate Bill SB1217 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New	Differences
1	1	88R30138 SCL-F
2	2	By: Middleton, et al. S.B. No. 1217
3	3	(Lozano)
4	4	Substitute the following for S.B. No. 1217: No.
5	5
6	6
7	7	A BILL TO BE ENTITLED
8	8	AN ACT
9	9	relating to the Texas Windstorm Insurance Association.
10	10	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
11	11	ARTICLE 1. ADMINISTRATION AND OPERATION OF TEXAS WINDSTORM
12	12	INSURANCE ASSOCIATION
13	13	SECTION 1.01. Section 2210.014, Insurance Code, is amended
14	14	by adding Subsection (d) to read as follows:
15	15	(d) The association is not subject to any insurance premium
16	16	tax or insurance maintenance fee or tax.
17	17	SECTION 1.02. Subchapter A, Chapter 2210, Insurance Code,
18	18	is amended by adding Section 2210.016 to read as follows:
19	19	Sec. 2210.016. LEGISLATIVE LOBBYING. (a) The association
20	20	may not use any money under its control to attempt to influence the
21	21	passage or defeat of a legislative measure.
22	22	(b) An association employee or member of the board of
23	23	directors who violates Subsection (a) is subject to:
24	24	(1) immediate termination; and
25	25	(2) a fine of $10,000 to be deposited in the
26	26	catastrophe reserve trust fund.
27	27	(c) This section does not prohibit an association employee
28	28	or member of the board of directors from using money under the
29	29	association's control to provide public information or to provide
30	30	information responsive to a request for public information.
31	31	SECTION 1.03. Section 2210.102, Insurance Code, is amended
32	32	by amending Subsections (a), (c), (c-1), (d), and (g) and adding
33	33	Subsection (d-1) to read as follows:
34	34	(a) The board of directors is composed of eleven [nine]
35	35	members appointed by the commissioner in accordance with this
36	36	section.
37	37	(c) Five [Three] members must, as of the date of the
38	38	appointment, reside in the first tier coastal counties. Each of
39	39	the following regions must, to the extent possible, be represented
40	40	by a member residing in the region and appointed under this
41	41	subsection:
42	42	(1) the region consisting of Cameron, Kenedy, Kleberg,
43	43	and Willacy Counties;
44	44	(2) the region consisting of Aransas, Calhoun, Nueces,
45	45	Refugio, and San Patricio Counties; and
46	46	(3) the region consisting of Brazoria, Chambers,
47	47	Galveston, Jefferson, and Matagorda Counties and any part of Harris
48	48	County designated as a catastrophe area under Section 2210.005.
49	49	(c-1) Two [One] of the members appointed under Subsection
50	50	(c) must be [a] property and casualty agents [agent] who are [is]
51	51	licensed under this code and are [is] not [a] captive agents
52	52	[agent].
53	53	(d) Three members must reside in an area of this state that
54	54	is located outside the first tier coastal counties [more than 100
55	55	miles from the Texas coastline].
56	56	(d-1) One of the members appointed under Subsection (d) must
57	57	be the public counsel of the office of public insurance counsel or
58	58	the counsel's designee.
59	59	(g) Members appointed to the board of directors under
60	60	Subsections (c) and (d), other than a [the] member appointed under
61	61	Subsection (c-1), must represent the general public in the regions
62	62	described by those subsections. A person may not be appointed to
63	63	represent the general public under Subsection (c) or (d) if the
64	64	person or the person's spouse:
65	65	(1) is employed by or participates in the management
66	66	of a business entity or other organization:
67	67	(A) operating in the property and casualty
68	68	insurance industry in this state;
69	69	(B) receiving money from the association, other
70	70	than insurance claim payments; or
71	71	(C) receiving money from association
72	72	policyholders with respect to the policyholders' claims;
73	73	(2) owns or controls, directly or indirectly, more
74	74	than a 10 percent interest in a business entity or other
75	75	organization:
76	76	(A) operating in the property and casualty
77	77	insurance industry in this state;
78	78	(B) receiving money from the association, other
79	79	than insurance claim payments; or
80	80	(C) receiving money from association
81	81	policyholders with respect to the policyholders' claims; or
82	82	(3) uses or receives a substantial amount of tangible
83	83	goods, services, or money from the association, other than:
84	84	(A) insurance claim payments; or
85	85	(B) compensation or reimbursement authorized by
86	86	law for the board members' membership, attendance, or expenses.
87	87	SECTION 1.04. Section 2210.103(a), Insurance Code, is
88	88	amended to read as follows:
89	89	(a) Members of the board of directors serve three-year
90	90	staggered terms, with the terms of three or four members expiring on
91	91	the third Tuesday of March of each year.
92	92	SECTION 1.05. Section 2210.105(d), Insurance Code, is
93	93	amended to read as follows:
94	94	(d) Except for an emergency meeting, a meeting of the board
95	95	of directors shall be held at a location in a first tier coastal
96	96	county or a second tier coastal county as determined by the board of
97	97	directors.
98	98	SECTION 1.06. Subchapter E, Chapter 2210, Insurance Code,
99	99	is amended by adding Section 2210.211 to read as follows:
100	100	Sec. 2210.211. LIMITATIONS ON CERTAIN ADJUSTMENTS. (a) The
101	101	association may not automatically adjust the amount of coverage to
102	102	be purchased by a policyholder.
103	103	(b) The association may not adjust premiums, fees, or any
104	104	other costs to policyholders for inflation without a vote by the
105	105	board of directors.
106	106	SECTION 1.07. Section 2210.352(a), Insurance Code, is
107	107	amended to read as follows:
108	108	(a) Not later than September [August] 15 of each year, the
109	109	association shall file with the department a proposed manual rate
110	110	for all types and classes of risks written by the association.
111	111	SECTION 1.08. Subchapter J, Chapter 2210, Insurance Code,
112	112	is amended by adding Section 2210.4531 to read as follows:
113	113	Sec. 2210.4531. DETERMINATION OF PROBABLE MAXIMUM LOSS.
114	114	(a) The association shall file with the department a proposed
115	115	probable maximum loss, subject to Section 2210.453.
116	116	(b) In determining the probable maximum loss, the
117	117	association:
118	118	(1) may not consider the cost of providing loss
119	119	adjustments;
120	120	(2) shall, to the extent possible, contract with any
121	121	disinterested third parties necessary to execute any catastrophe
122	122	models that were executed in the preceding storm season;
123	123	(3) shall, if the association is unable to contract
124	124	for the execution of a catastrophe model described by Subdivision
125	125	(2), contract with any disinterested third party necessary to
126	126	execute a catastrophe model that is substantially similar to the
127	127	model for which the association is unable to contract under
128	128	Subdivision (2);
129	129	(4) may contract with any disinterested third parties
130	130	to execute catastrophe models in addition to the models required
131	131	under Subdivisions (2) and (3);
132	132	(5) shall provide to a disinterested third party
133	133	executing a catastrophe model any information necessary to comply
134	134	with this subsection;
135	135	(6) may not use a combination of catastrophe models to
136	136	determine the probable maximum loss; and
137	137	(7) may use only the catastrophe model that produces
138	138	the lowest probable maximum loss.
139	139	(c) The association shall make any information produced in
140	140	compliance with Subsection (b) publicly available on the
141	141	association's Internet website.
142	142	(d) The association may only use a probable maximum loss
143	143	that is approved by the commissioner. The commissioner may reject a
144	144	probable maximum loss filed with the department by the association
145	145	and set a probable maximum loss at any amount determined by the
146	146	commissioner.
147	147	(e) The amount of loss adjustment expense, as adopted by the
148	148	board of directors for a catastrophe year and used for the
149	149	association's rate indication for purposes of filing a rate under
150	150	this chapter, must be considered above the probable maximum loss.
151	151	SECTION 1.09. Section 542A.002(b), Insurance Code, is
152	152	amended to read as follows:
153	153	(b) This chapter does not apply to an action against the
154	154	Texas Windstorm Insurance Association [or to an action relating to
155	155	or arising from a policy ceded to an insurer by the Texas Windstorm
156	156	Insurance Association under Subchapter O, Chapter 2210. This
157	157	chapter applies to an action that relates to or arises from a policy
158	158	renewed under Section 2210.703].
159	159	SECTION 1.10. The following provisions of the Insurance
160	160	Code are repealed:
161	161	(1) Section 2210.102(f); and
162	162	(2) Subchapter O, Chapter 2210.
163	163	SECTION 1.11. (a) The commissioner of insurance shall
164	164	appoint two additional members to the board of directors of the
165	165	Texas Windstorm Insurance Association as necessary under Sections
166	166	2210.102(c) and (c-1), Insurance Code, as amended by this article,
167	167	not later than December 1, 2023.
168	168	(b) Notwithstanding Section 2210.103, Insurance Code, as
169	169	amended by this article, the initial term of one of the board
170	170	members appointed under Subsection (a) of this section expires on
171	171	the third Tuesday of March 2026, and the initial term of one of the
172	172	board members appointed under Subsection (a) of this section
173	173	expires on the third Tuesday of March 2027.
174	174	(c) Notwithstanding Section 2210.102(d-1), Insurance Code,
175	175	as added by this article, a member of the board of directors serving
176	176	under Section 2210.102(d), Insurance Code, is not required to be
177	177	the public insurance counsel or the public insurance counsel's
178	178	designee until the first vacancy under Section 2210.102(d) that
179	179	occurs on or after the effective date of this article.
180	180	SECTION 1.12. This article takes effect immediately if this
181	181	Act receives a vote of two-thirds of all the members elected to each
182	182	house, as provided by Section 39, Article III, Texas Constitution.
183	183	If this Act does not receive the vote necessary for immediate
184	184	effect, this article takes effect September 1, 2023.
185	185	ARTICLE 2. FUNDING OF INSURED LOSSES AND OPERATING EXPENSES OF
186	186	TEXAS WINDSTORM INSURANCE ASSOCIATION
187	187	SECTION 2.01. (a) In this section, "association" means the
188	188	Texas Windstorm Insurance Association.
189	189	(b) The legislature finds that the use of public securities
190	190	would not be an efficient or viable long-term method to fund losses
191	191	of the association in order for the association to continue to
192	192	provide windstorm and hail insurance after a catastrophic event.
193	193	Subchapter B-2, Chapter 2210, Insurance Code, as added by this Act,
194	194	is intended to replace Subchapter B-1, Chapter 2210, Insurance
195	195	Code, to provide for funding of excess losses and operating
196	196	expenses of the association incurred after December 31, 2023.
197	197	(c) The legislature finds that:
198	198	(1) previous experience has shown that the expense to
199	199	the association of issuing public securities, and the interest
200	200	rates for those securities, would be significant and can impose
201	201	significant long-term expense obligations on coastal property and
202	202	casualty risks that may be avoided if the legislature provides for
203	203	financing or investment from available state money to the
204	204	association before or after a catastrophic event;
205	205	(2) the financing or investment described by
206	206	Subdivision (1) of this subsection would be a more efficient way to
207	207	provide funding necessary for the association to pay losses after a
208	208	catastrophic event; and
209	209	(3) a loan or other investment from available state
210	210	money to the association of not more than $500 million before a
211	211	catastrophic event and not more than $1 billion after a
212	212	catastrophic event would:
213	213	(A) replace the funding levels currently
214	214	provided by issuing public securities;
215	215	(B) be consistent with sound insurance solvency
216	216	standards;
217	217	(C) provide a more viable method for the
218	218	association to have money for losses after a catastrophic event
219	219	than the issuance of public securities; and
220	220	(D) provide a secured investment for the state
221	221	that would:
222	222	(i) yield interest income for the state on
223	223	state money; and
224	224	(ii) be adequately secured for repayment
225	225	through statewide catastrophe surcharges on certain insurance
226	226	policies in this state.
227	227	(d) The legislature finds that authorizing catastrophe
228	228	surcharges is a viable method to assure repayment of loans or
229	229	investments of state money after a hurricane and to ensure that the
230	230	association can continue to provide windstorm and hail insurance in
231	231	the coastal areas of this state after a catastrophic event to
232	232	maintain the association's viability for the benefit of the public
233	233	and in furtherance of a public purpose.
234	234	SECTION 2.02. The heading to Subchapter B-1, Chapter 2210,
235	235	Insurance Code, is amended to read as follows:
236	236	SUBCHAPTER B-1. PAYMENT OF LOSSES INCURRED BEFORE JANUARY 1, 2024
237	237	SECTION 2.03. Subchapter B-1, Chapter 2210, Insurance Code,
238	238	is amended by adding Section 2210.070 to read as follows:
239	239	Sec. 2210.070. APPLICABILITY OF SUBCHAPTER. (a) This
240	240	subchapter applies only to the payment of losses and operating
241	241	expenses of the association for a catastrophe year that occurs
242	242	before January 1, 2024, and results in excess losses and operating
243	243	expenses incurred by the association before January 1, 2024.
244	244	(b) Payment of excess losses and operating expenses of the
245	245	association incurred after December 31, 2023, shall be paid as
246	246	provided by Subchapter B-2.
247	247	SECTION 2.04. Section 2210.071(a), Insurance Code, is
248	248	amended to read as follows:
249	249	(a) If, in a catastrophe year before January 1, 2024, an
250	250	occurrence or series of occurrences in a catastrophe area results
251	251	in insured losses and operating expenses of the association in
252	252	excess of premium and other revenue of the association, the excess
253	253	losses and operating expenses shall be paid as provided by this
254	254	subchapter.
255	255	SECTION 2.05. Section 2210.0715(b), Insurance Code, is
256	256	amended to read as follows:
257	257	(b) Proceeds of public securities issued, a financing
258	258	arrangement entered into, or assessments made before January 1,
259	259	2024, or as a result of any occurrence or series of occurrences in a
260	260	catastrophe year that occurs before January 1, 2024, and results in
261	261	insured losses before that date may not be included in reserves
262	262	available for a subsequent catastrophe year for purposes of this
263	263	section or Section 2210.082 unless approved by the commissioner.
264	264	SECTION 2.06. The heading to Section 2210.075, Insurance
265	265	Code, is amended to read as follows:
266	266	Sec. 2210.075. REINSURANCE BY MEMBERS.
267	267	SECTION 2.07. Subchapter B-1, Chapter 2210, Insurance Code,
268	268	is amended by adding Section 2210.076 to read as follows:
269	269	Sec. 2210.076. PAYMENT FROM STATE-FUNDED FINANCING
270	270	ARRANGEMENTS. (a) Notwithstanding the provisions of this
271	271	subchapter to the contrary, the association may pay losses the
272	272	association would otherwise pay as provided by Section 2210.072,
273	273	2210.073, or 2210.0741 by borrowing from, or entering into other
274	274	financing arrangements with, this state as provided by Subchapter
275	275	M-1 and Section 404.0242, Government Code.
276	276	(b) Subchapter M-2 applies to the financing of losses under
277	277	this section to the extent necessary to secure and repay a debt
278	278	obligation to the state under a financing arrangement entered into
279	279	with this state under this section.
280	280	(c) A financing arrangement described by Subsection (a) may
281	281	also be used for a purpose described by Section 2210.072(d) in the
282	282	same manner as a financing arrangement with a market source.
283	283	SECTION 2.08. Chapter 2210, Insurance Code, is amended by
284	284	adding Subchapter B-2 to read as follows:
285	285	SUBCHAPTER B-2. PAYMENT OF EXCESS LOSSES AND OPERATING EXPENSES
286	286	Sec. 2210.080. APPLICABILITY OF SUBCHAPTER. (a) This
287	287	subchapter applies only to the payment of losses and operating
288	288	expenses of the association for a catastrophe year that occurs
289	289	after December 31, 2023, and results in excess losses and operating
290	290	expenses incurred by the association after December 31, 2023.
291	291	(b) This section expires September 1, 2025.
292	292	Sec. 2210.081. PAYMENT OF EXCESS LOSSES. (a) If, in a
293	293	catastrophe year, an occurrence or series of occurrences in a
294	294	catastrophe area results in insured losses and operating expenses
295	295	of the association in excess of premium and other revenue of the
296	296	association, the excess losses and operating expenses shall be paid
297	297	as provided by this subchapter.
298	298	(b) The association may not pay insured losses and operating
299	299	expenses resulting from an occurrence or series of occurrences in a
300	300	catastrophe year with premium and other revenue earned in a
301	301	subsequent year.
302	302	Sec. 2210.082. PAYMENT FROM RESERVES AND TRUST FUND;
303	303	STATE-FUNDED FINANCING ARRANGEMENTS. (a) The association shall
304	304	pay insured losses and operating expenses resulting from an
305	305	occurrence or series of occurrences in a catastrophe year in excess
306	306	of premium and other revenue of the association for that
307	307	catastrophe year from reserves of the association available before
308	308	or accrued during that catastrophe year and amounts in the
309	309	catastrophe reserve trust fund available before or accrued during
310	310	that catastrophe year.
311	311	(b) For insured losses and operating expenses for a
312	312	catastrophe year not paid under Subsection (a), the association
313	313	shall arrange for financing of not more than $1 billion through one
314	314	or more financing arrangements entered into with the state as
315	315	provided by Subchapter M-1 and Section 404.0242, Government Code.
316	316	Sec. 2210.083. PAYMENT FROM MEMBER ASSESSMENTS. (a)
317	317	Insured losses and operating expenses for a catastrophe year not
318	318	paid under Section 2210.082 shall be paid as provided by this
319	319	section from member assessments not to exceed $1 billion for that
320	320	catastrophe year.
321	321	(b) The board of directors shall notify each association
322	322	member of the amount of the member's assessment under this section.
323	323	The proportion of the insured losses and operating expenses
324	324	allocable to each insurer under this section shall be determined in
325	325	the manner used to determine each insurer's participation in the
326	326	association for the year under Section 2210.052.
327	327	(c) An association member may not recoup an assessment paid
328	328	under this section through a premium surcharge or tax credit.
329	329	Sec. 2210.084. REINSURANCE BY MEMBERS FOR MEMBER
330	330	ASSESSMENTS. (a) Before any occurrence or series of occurrences,
331	331	an association member may purchase reinsurance to cover an
332	332	assessment for which the member would otherwise be liable under
333	333	this subchapter.
334	334	(b) An association member must notify the board of
335	335	directors, in the manner prescribed by the association, whether the
336	336	member will be purchasing reinsurance. If the member does not
337	337	purchase reinsurance under this section, the member remains liable
338	338	for any assessment imposed under this subchapter.
339	339	SECTION 2.09. Section 2210.452(b), Insurance Code, is
340	340	amended to read as follows:
341	341	(b) All money, including investment income, deposited in
342	342	the trust fund constitutes state funds until disbursed as provided
343	343	by this chapter and commissioner rules. The comptroller shall hold
344	344	the money outside the state treasury on behalf of, and with legal
345	345	title in, the department on behalf of the association. The
346	346	department shall keep and maintain the trust fund in accordance
347	347	with this chapter and commissioner rules. The comptroller, as
348	348	custodian of the trust fund, shall administer the trust fund
349	349	strictly and solely as provided by this chapter and commissioner
350	350	rules. The association may include the amounts held in the
351	351	catastrophe reserve trust fund as an admitted asset in the
352	352	financial statements of the association.
353	353	SECTION 2.10. Section 2210.4521(a), Insurance Code, is
354	354	amended to read as follows:
355	355	(a) The comptroller shall invest in accordance with the
356	356	investment standard described by Section 404.024(j), Government
357	357	Code, the portion of the trust fund balance that exceeds the amount
358	358	of the sufficient balance determined under Subsection (b). The
359	359	comptroller's investment of that portion of the balance is not
360	360	subject to any other limitation or other requirement provided by
361	361	Section 404.024, Government Code. The Texas Treasury Safekeeping
362	362	Trust Company and board of directors may recommend investments to
363	363	protect the trust fund and create investment income.
364	364	SECTION 2.11. Sections 2210.453(d) and (e), Insurance Code,
365	365	are amended to read as follows:
366	366	(d) The association may obtain reinsurance at any level
367	367	including excess of loss, quota share, and other forms of
368	368	reinsurance to protect the solvency and viability of the
369	369	association. The commissioner may consult with the board of
370	370	directors regarding methods to protect the solvency and continued
371	371	viability of the association, including by protecting the minimum
372	372	balance, acquiring reinsurance, or by other means [The cost of the
373	373	reinsurance purchased or alternative financing mechanisms used
374	374	under this section in excess of the minimum funding level required
375	375	by Subsection (b) shall be paid by assessments as provided by this
376	376	subsection. The association, with the approval of the
377	377	commissioner, shall notify each member of the association of the
378	378	amount of the member's assessment under this subsection. The
379	379	proportion of the cost to each insurer under this subsection shall
380	380	be determined in the manner used to determine each insurer's
381	381	participation in the association for the year under Section
382	382	2210.052].
383	383	(e) The commissioner may adopt a method or approve the
384	384	association's method of determining the probability of one in 100
385	385	for association risks. The commissioner shall provide any adopted
386	386	or approved method to the association on or before February 1 of
387	387	each year [A member of the association may not recoup an assessment
388	388	paid under Subsection (d) through a premium surcharge or tax
389	389	credit].
390	390	SECTION 2.12. Section 2210.601, Insurance Code, is amended
391	391	to read as follows:
392	392	Sec. 2210.601. FINDINGS [PURPOSE]. The legislature finds
393	393	that for losses incurred before January 1, 2024, authorizing the
394	394	association to enter into financing arrangements with this state as
395	395	provided by Section 2210.076 [issuance of public securities] to
396	396	provide a method to raise funds to provide windstorm and hail
397	397	insurance through the association in certain designated portions of
398	398	the state is for the benefit of the public and in furtherance of a
399	399	public purpose.
400	400	SECTION 2.13. Subchapter M, Chapter 2210, Insurance Code,
401	401	is amended by adding Section 2210.6015 to read as follows:
402	402	Sec. 2210.6015. APPLICABILITY OF SUBCHAPTER. To provide
403	403	for a reasonable transition, the association may issue public
404	404	securities under this subchapter or enter into financing
405	405	arrangements with this state as provided by Section 2210.076 if the
406	406	association needs to provide funds for excess losses and operating
407	407	expenses incurred by the association before January 1, 2024, for a
408	408	catastrophe year occurring before January 1, 2024. After December
409	409	31, 2023, the association may not issue public securities under
410	410	this subchapter except to fund excess losses and operating expenses
411	411	incurred before January 1, 2024.
412	412	SECTION 2.14. Chapter 2210, Insurance Code, is amended by
413	413	adding Subchapters M-1 and M-2 to read as follows:
414	414	SUBCHAPTER M-1. STATE-FUNDED CATASTROPHE FINANCING ARRANGEMENTS
415	415	Sec. 2210.631. STATE-FUNDED CATASTROPHE FINANCING
416	416	ARRANGEMENTS. The legislature has determined that providing
417	417	catastrophe funding to the association by permitting the
418	418	association to enter into a financing arrangement with this state
419	419	is an acceptable use of state money and provides an efficient method
420	420	for the association to pay losses following a catastrophic event.
421	421	Sec. 2210.632. PROCEEDS OF CATASTROPHE FINANCING
422	422	ARRANGEMENT. The proceeds of a catastrophe financing arrangement
423	423	with this state entered into under this subchapter before a
424	424	catastrophic event shall be deposited in the catastrophe reserve
425	425	trust fund.
426	426	Sec. 2210.633. CATASTROPHE FINANCING ARRANGEMENT
427	427	AUTHORIZED; LIMITS. (a) The association may enter into a financing
428	428	arrangement with this state as provided by Section 404.0242,
429	429	Government Code:
430	430	(1) before a catastrophic event, for not more than
431	431	$500 million; and
432	432	(2) after a catastrophic event that depletes the
433	433	catastrophe reserve fund, for not more than $1 billion.
434	434	(b) The amount available under Subsection (a)(2) is reduced
435	435	by the amount of any outstanding pre-event or post-event financing
436	436	obtained by the association under this section.
437	437	SUBCHAPTER M-2. CATASTROPHE SURCHARGE
438	438	Sec. 2210.641. DEFINITION. In this subchapter,
439	439	"catastrophic event" means an occurrence or a series of occurrences
440	440	that:
441	441	(1) occurs in a catastrophe area during a calendar
442	442	year; and
443	443	(2) results in insured losses and operating expenses
444	444	of the association in excess of premium and other revenue of the
445	445	association.
446	446	Sec. 2210.642. APPLICABILITY OF SUBCHAPTER. (a)
447	447	Notwithstanding Section 2210.006, this subchapter applies to an
448	448	insurer that is:
449	449	(1) an insurer authorized to engage in the business of
450	450	insurance in this state that is required to be a member of the
451	451	association, including a farm mutual insurance company that is a
452	452	fronting insurer as defined by Section 221.001(c);
453	453	(2) a farm mutual insurance company that is not a
454	454	fronting insurer as defined by Section 221.001(c) only for purposes
455	455	of the collection of surcharges authorized by this subchapter;
456	456	(3) an unaffiliated eligible surplus lines insurer
457	457	writing the lines of business subject to a premium surcharge under
458	458	this subchapter;
459	459	(4) the association; and
460	460	(5) the FAIR Plan Association.
461	461	(b) A premium surcharge under this subchapter applies to:
462	462	(1) a policy written under the following lines of
463	463	insurance:
464	464	(A) fire and allied lines;
465	465	(B) farm and ranch owners; and
466	466	(C) residential property insurance; and
467	467	(2) the property insurance portion of a commercial
468	468	multiple peril insurance policy.
469	469	Sec. 2210.6425. CONSTRUCTION OF SUBCHAPTER. (a) This
470	470	subchapter may not be construed to require an insurer to be an
471	471	association member if the insurer is not otherwise required to be a
472	472	member under Section 2210.052.
473	473	(b) A farm mutual insurance company that is not a fronting
474	474	insurer as defined by Section 221.001(c) is not a member of the
475	475	association as a result of the company's collection of surcharges
476	476	authorized by this subchapter or for any other reason.
477	477	Sec. 2210.643. ANNUAL FINANCIAL REPORT BY COMMISSIONER.
478	478	The commissioner shall determine the amount available in the
479	479	catastrophe reserve trust fund as of December 31 of each year and
480	480	provide a written report to the governor, lieutenant governor, and
481	481	speaker of the house of representatives that includes:
482	482	(1) the amount available in the catastrophe reserve
483	483	trust fund; and
484	484	(2) information regarding the current financial
485	485	condition of the association.
486	486	Sec. 2210.6435. CATASTROPHE SURCHARGES. (a) The
487	487	commissioner, in consultation with the board of directors, may
488	488	order a catastrophe surcharge as provided by this subchapter only
489	489	if:
490	490	(1) before a catastrophic event, the association
491	491	enters into a financing arrangement with this state under
492	492	Subchapter M-1 that is the basis for the surcharge; or
493	493	(2) after a catastrophic event:
494	494	(A) the commissioner determines that the
495	495	association has depleted its reserves, other money, and the
496	496	catastrophe reserve trust fund; and
497	497	(B) the association enters into a financing
498	498	arrangement with this state under Subchapter M-1 that is the basis
499	499	for the surcharge.
500	500	(b) The commissioner, in consultation with the board of
501	501	directors, shall set the catastrophe surcharge as a percentage of
502	502	premium to be collected by each insurer to which this subchapter
503	503	applies.
504	504	(c) The total amount authorized to be collected under this
505	505	section for any catastrophe surcharge may not exceed the amount
506	506	needed to repay the debt obligation to the state under the financing
507	507	arrangement entered into with this state under Subchapter M-1 that
508	508	is the basis for the surcharge.
509	509	(d) The catastrophe surcharge percentage must be set in an
510	510	amount sufficient to repay the debt obligation to the state under
511	511	the financing arrangement entered into with this state under
512	512	Subchapter M-1 that is the basis for the surcharge. The
513	513	commissioner may set the surcharge as a percentage of premium to
514	514	collect the needed aggregate amount over a period of time not to
515	515	exceed three years.
516	516	(e) A catastrophe surcharge authorized under this section
517	517	shall be assessed by insurers on all policyholders of policies that
518	518	are subject to this subchapter.
519	519	(f) A catastrophe surcharge under this subchapter is a
520	520	separate charge in addition to the premiums collected and is not
521	521	subject to premium tax or commissions.
522	522	(g) Failure by a policyholder to pay a catastrophe surcharge
523	523	constitutes failure to pay premium for purposes of policy
524	524	cancellation.
525	525	(h) A catastrophe surcharge is not refundable if the policy
526	526	is canceled or terminated.
527	527	Sec. 2210.644. CATASTROPHE SURCHARGE PROCEEDS. The
528	528	proceeds of a catastrophe surcharge authorized under this
529	529	subchapter shall be deposited into the catastrophe reserve trust
530	530	fund or an account designated by the comptroller for purposes of
531	531	repayment of the association's debt obligation to the state under
532	532	the financing arrangement that is the basis for the surcharge.
533	533	Sec. 2210.6445. DISCLOSURE OF SURCHARGE. Each policy that
534	534	is assessed a surcharge under this subchapter shall contain the
535	535	following prominent disclosure in the documents attached to the
536	536	policy:
537	537	"A CATASTROPHE SURCHARGE HAS BEEN INCLUDED ON YOUR POLICY.
538	538	THIS SURCHARGE WILL BE USED TO REPAY STATE MONEY USED BY THE TEXAS
539	539	WINDSTORM INSURANCE ASSOCIATION TO PAY FOR LOSSES AFTER A
540	540	CATASTROPHIC EVENT, INCLUDING A HURRICANE. THE SURCHARGE IS NOT
541	541	REFUNDABLE IF YOU CANCEL OR TERMINATE THIS POLICY."
542	542	Sec. 2210.645. EXEMPTION FROM TAXATION. A surcharge
543	543	collected under this subchapter is exempt from taxation by this
544	544	state or a municipality or other political subdivision of this
545	545	state.
546	546	Sec. 2210.6455. LIMITATION OF PERSONAL LIABILITY. The
547	547	association members, the insurers required to collect a surcharge
548	548	under this subchapter, members of the board of directors,
549	549	association employees, the commissioner, and department employees
550	550	are not personally liable as a result of exercising the rights and
551	551	responsibilities granted under this subchapter.
552	552	Sec. 2210.646. EXEMPTION FROM SURCHARGE. An insurer may
553	553	not collect a surcharge authorized under this subchapter on any
554	554	policy issued to this state, an agency of this state, or a political
555	555	subdivision of this state.
556	556	SECTION 2.15. Subchapter C, Chapter 404, Government Code,
557	557	is amended by adding Section 404.0242 to read as follows:
558	558	Sec. 404.0242. INVESTMENT IN WINDSTORM CATASTROPHE
559	559	FINANCING ARRANGEMENTS. (a) The comptroller shall invest state
560	560	money to provide financing for losses of the Texas Windstorm
561	561	Insurance Association in accordance with this section and Chapter
562	562	2210, Insurance Code.
563	563	(b) For purposes of this section, the comptroller may enter
564	564	into an appropriate financing arrangement with the Texas Windstorm
565	565	Insurance Association to provide the association up to $500 million
566	566	in funding before a catastrophic event and up to $1 billion in
567	567	funding after a catastrophic event to fund the losses of the
568	568	association arising from the catastrophic event. Financing
569	569	provided under this section must be secured and repaid by
570	570	catastrophe surcharges under Subchapter M-2, Chapter 2210,
571	571	Insurance Code.
572	572	(c) If the terms of a financing arrangement entered into
573	573	under this section include interest, the interest rate may not
574	574	exceed the sum of:
575	575	(1) the lesser of:
576	576	(A) the rate set by the Federal Housing Finance
577	577	Agency; or
578	578	(B) the federal funds rate as specified by
579	579	Section 4A.506(b), Business & Commerce Code; and
580	580	(2) 2 percent.
581	581	(d) A debt obligation entered into under this section may
582	582	not exceed 36 months to maturity.
583	583	(e) Notwithstanding any other law, directly or indirectly
584	584	through a separately managed account or other investment vehicle,
585	585	the comptroller may use up to $1 billion of the economic
586	586	stabilization fund balance to provide financing under this section.
587	587	(f) The aggregate amount of outstanding pre-event and
588	588	post-event financing provided under this section may not exceed $1
589	589	billion.
590	590	SECTION 2.16. Effective September 1, 2025, the following
591	591	provisions of the Insurance Code are repealed:
592	592	(1) Subchapter B-1, Chapter 2210; and
593	593	(2) Subchapter M, Chapter 2210.
594	594	SECTION 2.17. As soon as practicable after the effective
595	595	date of this Act and not later than December 1, 2023, the
596	596	commissioner of insurance shall adopt rules necessary to implement
597	597	Subchapters B-2 and M-2, Insurance Code, as added by this Act.
598	598	ARTICLE 3. CONFORMING AMENDMENTS FOR ARTICLE 2
599	599	SECTION 3.01. Effective September 1, 2025, Section
600	600	2210.0081, Insurance Code, is amended to read as follows:
601	601	Sec. 2210.0081. CERTAIN ACTIONS BROUGHT AGAINST
602	602	ASSOCIATION BY COMMISSIONER. In an action brought by the
603	603	commissioner against the association under Chapter 441,[:
604	604	[(1) the association's inability to satisfy
605	605	obligations under Subchapter M related to the issuance of public
606	606	securities under this chapter constitutes a condition that makes
607	607	the association's continuation in business hazardous to the public
608	608	or to the association's policyholders for the purposes of Section
609	609	441.052;
610	610	[(2)] the time for the association to comply with the
611	611	requirements of supervision or for the conservator to complete the
612	612	conservator's duties, as applicable, is limited to three years from
613	613	the date the commissioner commences the action against the
614	614	association[; and
615	615	[(3) unless the commissioner takes further action
616	616	against the association under Chapter 441, as a condition of
617	617	release from supervision, the association must demonstrate to the
618	618	satisfaction of the commissioner that the association is able to
619	619	satisfy obligations under Subchapter M related to the issuance of
620	620	public securities under this chapter].
621	621	SECTION 3.02. (a) Section 2210.056(b), Insurance Code, is
622	622	amended to read as follows:
623	623	(b) The association's assets may not be used for or diverted
624	624	to any purpose other than to:
625	625	(1) satisfy, in whole or in part, the liability of the
626	626	association on claims made on policies written by the association;
627	627	(2) make investments authorized under applicable law;
628	628	(3) pay reasonable and necessary administrative
629	629	expenses incurred in connection with the operation of the
630	630	association and the processing of claims against the association;
631	631	(4) satisfy, in whole or in part, the obligations of
632	632	the association incurred in connection with Subchapters B-1, B-2,
633	633	J, [and] M, and M-2, including reinsurance, public securities, and
634	634	financial instruments; or
635	635	(5) make remittance under the laws of this state to be
636	636	used by this state to:
637	637	(A) pay claims made on policies written by the
638	638	association;
639	639	(B) purchase reinsurance covering losses under
640	640	those policies; or
641	641	(C) prepare for or mitigate the effects of
642	642	catastrophic natural events.
643	643	(b) Effective September 1, 2025, Sections 2210.056(b) and
644	644	(c), Insurance Code, are amended to read as follows:
645	645	(b) The association's assets may not be used for or diverted
646	646	to any purpose other than to:
647	647	(1) satisfy, in whole or in part, the liability of the
648	648	association on claims made on policies written by the association;
649	649	(2) make investments authorized under applicable law;
650	650	(3) pay reasonable and necessary administrative
651	651	expenses incurred in connection with the operation of the
652	652	association and the processing of claims against the association;
653	653	(4) satisfy, in whole or in part, the obligations of
654	654	the association incurred in connection with Subchapters B-2 [B-1],
655	655	J, and M-2 [M], including reinsurance[, public securities,] and
656	656	financial instruments; or
657	657	(5) make remittance under the laws of this state to be
658	658	used by this state to:
659	659	(A) pay claims made on policies written by the
660	660	association;
661	661	(B) purchase reinsurance covering losses under
662	662	those policies; or
663	663	(C) prepare for or mitigate the effects of
664	664	catastrophic natural events.
665	665	(c) On dissolution of the association, all assets of the
666	666	association[, other than assets pledged for the repayment of public
667	667	securities issued under this chapter,] revert to this state.
668	668	SECTION 3.03. (a) Section 2210.1052, Insurance Code, is
669	669	amended to read as follows:
670	670	Sec. 2210.1052. EMERGENCY MEETING. If the ultimate loss
671	671	estimate for an occurrence or series of occurrences made by the
672	672	chief financial officer or chief actuary of the association
673	673	indicates member insurers may be subject to an assessment under
674	674	Subchapter B-1 or B-2, the board of directors shall call an
675	675	emergency meeting to notify the member insurers about the
676	676	assessment.
677	677	(b) Effective September 1, 2025, Section 2210.1052,
678	678	Insurance Code, is amended to read as follows:
679	679	Sec. 2210.1052. EMERGENCY MEETING. If the ultimate loss
680	680	estimate for an occurrence or series of occurrences made by the
681	681	chief financial officer or chief actuary of the association
682	682	indicates member insurers may be subject to an assessment under
683	683	Subchapter B-2 [B-1], the board of directors shall call an
684	684	emergency meeting to notify the member insurers about the
685	685	assessment.
686	686	SECTION 3.04. Effective September 1, 2025, Section
687	687	2210.355(b), Insurance Code, is amended to read as follows:
688	688	(b) In adopting rates under this chapter, the following must
689	689	be considered:
690	690	(1) the past and prospective loss experience within
691	691	and outside this state of hazards for which insurance is made
692	692	available through the plan of operation, if any;
693	693	(2) expenses of operation, including acquisition
694	694	costs;
695	695	(3) a reasonable margin for profit and contingencies;
696	696	and
697	697	(4) [payment of public security obligations issued
698	698	under this chapter, including the additional amount of any debt
699	699	service coverage determined by the association to be required for
700	700	the issuance of marketable public securities; and
701	701	[(5)] all other relevant factors, within and outside
702	702	this state.
703	703	SECTION 3.05. (a) Section 2210.363(a), Insurance Code, is
704	704	amended to read as follows:
705	705	(a) The association may offer a person insured under this
706	706	chapter an actuarially justified premium discount on a policy
707	707	issued by the association, or an actuarially justified credit
708	708	against a surcharge assessed against the person, other than a
709	709	surcharge assessed under Subchapter M or M-2, if:
710	710	(1) the construction, alteration, remodeling,
711	711	enlargement, or repair of, or an addition to, insurable property
712	712	exceeds applicable building code standards set forth in the plan of
713	713	operation; or
714	714	(2) the person elects to purchase a binding
715	715	arbitration endorsement under Section 2210.554.
716	716	(b) Effective September 1, 2025, Section 2210.363(a),
717	717	Insurance Code, is amended to read as follows:
718	718	(a) The association may offer a person insured under this
719	719	chapter an actuarially justified premium discount on a policy
720	720	issued by the association, or an actuarially justified credit
721	721	against a surcharge assessed against the person, other than a
722	722	surcharge assessed under Subchapter M-2 [M], if:
723	723	(1) the construction, alteration, remodeling,
724	724	enlargement, or repair of, or an addition to, insurable property
725	725	exceeds applicable building code standards set forth in the plan of
726	726	operation; or
727	727	(2) the person elects to purchase a binding
728	728	arbitration endorsement under Section 2210.554.
729	729	SECTION 3.06. (a) Sections 2210.452(a) and (d), Insurance
730	730	Code, are amended to read as follows:
731	731	(a) The commissioner shall adopt rules under which the
732	732	association makes payments to the catastrophe reserve trust fund.
733	733	Except as otherwise specifically provided by this section, the
734	734	trust fund may be used only for purposes directly related to funding
735	735	the payment of insured losses, including:
736	736	(1) funding the obligations of the trust fund under
737	737	Subchapters [Subchapter] B-1 and B-2; and
738	738	(2) purchasing reinsurance or using alternative risk
739	739	financing mechanisms under Section 2210.453.
740	740	(d) The commissioner by rule shall establish the procedure
741	741	relating to the disbursement of money from the trust fund to
742	742	policyholders and for association administrative expenses directly
743	743	related to funding the payment of insured losses in the event of an
744	744	occurrence or series of occurrences within a catastrophe area that
745	745	results in a disbursement under Subchapter B-1 or B-2.
746	746	(b) Effective September 1, 2025, Sections 2210.452(a), (c),
747	747	and (d), Insurance Code, are amended to read as follows:
748	748	(a) The commissioner shall adopt rules under which the
749	749	association makes payments to the catastrophe reserve trust fund.
750	750	Except as otherwise specifically provided by this section, the
751	751	trust fund may be used only for purposes directly related to funding
752	752	the payment of insured losses, including:
753	753	(1) funding the obligations of the trust fund under
754	754	Subchapter B-2 [B-1]; and
755	755	(2) purchasing reinsurance or using alternative risk
756	756	financing mechanisms under Section 2210.453.
757	757	(c) At the end of each calendar year or policy year, the
758	758	association shall use the net gain from operations of the
759	759	association, including all premium and other revenue of the
760	760	association in excess of incurred losses and[,] operating expenses,
761	761	[public security obligations, and public security administrative
762	762	expenses,] to make payments to the trust fund, procure reinsurance,
763	763	or use alternative risk financing mechanisms, or to make payments
764	764	to the trust fund and procure reinsurance or use alternative risk
765	765	financing mechanisms.
766	766	(d) The commissioner by rule shall establish the procedure
767	767	relating to the disbursement of money from the trust fund to
768	768	policyholders and for association administrative expenses directly
769	769	related to funding the payment of insured losses in the event of an
770	770	occurrence or series of occurrences within a catastrophe area that
771	771	results in a disbursement under Subchapter B-2 [B-1].
772	772	SECTION 3.07. (a) Sections 2210.453(b) and (c), Insurance
773	773	Code, are amended to read as follows:
774	774	(b) The association shall maintain total available loss
775	775	funding in an amount not less than the probable maximum loss for the
776	776	association for a catastrophe year with a probability of one in 100.
777	777	If necessary, the required funding level shall be achieved through
778	778	the purchase of reinsurance or the use of alternative financing
779	779	mechanisms, or both, to operate in addition to or in concert with
780	780	the trust fund, public securities, financial instruments,
781	781	financing arrangements, and assessments authorized by this
782	782	chapter.
783	783	(c) The attachment point for reinsurance purchased under
784	784	this section may not be less than the aggregate amount of all
785	785	funding available to the association under Subchapters
786	786	[Subchapter] B-1 and B-2.
787	787	(b) Effective September 1, 2025, Sections 2210.453(b) and
788	788	(c), Insurance Code, are amended to read as follows:
789	789	(b) The association shall maintain total available loss
790	790	funding in an amount not less than the probable maximum loss for the
791	791	association for a catastrophe year with a probability of one in 100.
792	792	If necessary, the required funding level shall be achieved through
793	793	the purchase of reinsurance or the use of alternative financing
794	794	mechanisms, or both, to operate in addition to or in concert with
795	795	the trust fund, [public securities,] financial instruments,
796	796	financing arrangements, and assessments authorized by this
797	797	chapter.
798	798	(c) The attachment point for reinsurance purchased under
799	799	this section may not be less than the aggregate amount of all
800	800	funding available to the association under Subchapter B-2 [B-1].
801	801	ARTICLE 4. TRANSITION AND SAVING PROVISIONS FOR ARTICLES 2 AND 3
802	802	SECTION 4.01. Notwithstanding the repeal by this Act of
803	803	Subchapters B-1 and M, Chapter 2210, Insurance Code, and other
804	804	changes in law made by this Act effective September 1, 2025:
805	805	(1) the payment of excess losses and operating
806	806	expenses of the Texas Windstorm Insurance Association incurred
807	807	before January 1, 2024, is governed by the law as it existed on the
808	808	effective date of this Act, and that law is continued in effect for
809	809	that purpose;
810	810	(2) the issuance of public securities to pay excess
811	811	losses and operating expenses of the Texas Windstorm Insurance
812	812	Association incurred before January 1, 2024, the use of the
813	813	proceeds of those securities, the repayment or refinancing of those
814	814	securities, and any other rights, obligations, or limitations with
815	815	respect to those securities and proceeds of those securities are
816	816	governed by the law as it existed on the effective date of this Act,
817	817	and that law is continued in effect for that purpose; and
818	818	(3) proceeds of any assessments made under Subchapter
819	819	B-1, Chapter 2210, Insurance Code, may not be included in reserves
820	820	available for a catastrophe year for purposes of Section 2210.082,
821	821	Insurance Code, as added by this Act, unless approved by the
822	822	commissioner of insurance.
823	823	ARTICLE 5. EFFECTIVE DATE
824	824	SECTION 5.01. Except as otherwise provided by this Act,
825	825	this Act takes effect September 1, 2023.