Texas 2023 - 88th Regular

Texas Senate Bill SB841 Compare Versions

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1	1	88R4165 JES-F
2	2	By: Hinojosa S.B. No. 841
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to funding of excess losses and operating expenses of the
8	8	Texas Windstorm Insurance Association; authorizing an assessment,
9	9	a surcharge, and an infrastructure grant.
10	10	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
11	11	ARTICLE 1. FUNDING OF INSURED LOSSES AND OPERATING EXPENSES OF
12	12	TEXAS WINDSTORM INSURANCE ASSOCIATION
13	13	SECTION 1.01. (a) In this section, "association" means the
14	14	Texas Windstorm Insurance Association.
15	15	(b) The legislature finds that the use of public securities
16	16	is not an efficient or viable long-term method to fund losses of the
17	17	association in order for the association to continue to provide
18	18	windstorm and hail insurance after a catastrophic event. Subchapter
19	19	B-2, Chapter 2210, Insurance Code, as added by this Act, is intended
20	20	to replace Subchapter B-1, Insurance Code, to provide for funding
21	21	of excess losses and operating expenses of the association incurred
22	22	after December 31, 2023.
23	23	(c) The legislature finds that:
24	24	(1) previous experience has shown that the expense of
25	25	issuing public securities is significant and can impose
26	26	significant long-term expense obligations on coastal property and
27	27	casualty risks that may be avoided if the legislature provides for
28	28	an infrastructure grant to the association as a more efficient way
29	29	to provide either pre-event or post-event funding for the
30	30	association; and
31	31	(2) a grant to the association of not more than $1
32	32	billion would:
33	33	(A) replace the funding levels currently
34	34	provided by issuing public securities;
35	35	(B) be more consistent with sound insurance
36	36	solvency standards than the issuance of public securities; and
37	37	(C) provide a more viable method for the
38	38	association to have catastrophe reserve funds for a catastrophic
39	39	event than the issuance of public securities.
40	40	(d) The legislature finds that authorizing contingent
41	41	surcharges is a more viable method to raise money to replenish the
42	42	catastrophe reserve trust fund after a hurricane and to ensure that
43	43	the association can continue to provide windstorm and hail
44	44	insurance in the coastal areas of this state after a catastrophic
45	45	event to maintain the association's viability for the benefit of
46	46	the public and in furtherance of a public purpose.
47	47	SECTION 1.02. The heading to Subchapter B-1, Chapter 2210,
48	48	Insurance Code, is amended to read as follows:
49	49	SUBCHAPTER B-1. PAYMENT OF LOSSES INCURRED BEFORE JANUARY 1, 2024
50	50	SECTION 1.03. Subchapter B-1, Chapter 2210, Insurance Code,
51	51	is amended by adding Section 2210.070 to read as follows:
52	52	Sec. 2210.070. APPLICABILITY OF SUBCHAPTER. (a) This
53	53	subchapter applies only to the payment of losses and operating
54	54	expenses of the association for a catastrophe year that occurs
55	55	before January 1, 2024, and results in excess losses and operating
56	56	expenses incurred by the association before January 1, 2024.
57	57	(b) Payment of excess losses and operating expenses of the
58	58	association incurred after December 31, 2023, shall be paid as
59	59	provided by Subchapter B-2.
60	60	SECTION 1.04. Section 2210.071(a), Insurance Code, is
61	61	amended to read as follows:
62	62	(a) If, in a catastrophe year before January 1, 2024, an
63	63	occurrence or series of occurrences in a catastrophe area results
64	64	in insured losses and operating expenses of the association in
65	65	excess of premium and other revenue of the association, the excess
66	66	losses and operating expenses shall be paid as provided by this
67	67	subchapter.
68	68	SECTION 1.05. Section 2210.0715(b), Insurance Code, is
69	69	amended to read as follows:
70	70	(b) Proceeds of public securities issued or assessments
71	71	made before January 1, 2024, or as a result of any occurrence or
72	72	series of occurrences in a catastrophe year that occurs before
73	73	January 1, 2024, and results in insured losses before that date may
74	74	not be included in reserves available for a subsequent catastrophe
75	75	year for purposes of this section or Section 2210.082 unless
76	76	approved by the commissioner.
77	77	SECTION 1.06. The heading to Section 2210.075, Insurance
78	78	Code, is amended to read as follows:
79	79	Sec. 2210.075. REINSURANCE BY MEMBERS.
80	80	SECTION 1.07. Chapter 2210, Insurance Code, is amended by
81	81	adding Subchapter B-2 to read as follows:
82	82	SUBCHAPTER B-2. PAYMENT OF EXCESS LOSSES AND OPERATING EXPENSES
83	83	Sec. 2210.080. APPLICABILITY OF SUBCHAPTER. (a) This
84	84	subchapter applies only to payment of losses and operating expenses
85	85	of the association for a catastrophe year that occurs after
86	86	December 31, 2023, and results in excess losses and operating
87	87	expenses incurred by the association after December 31, 2023.
88	88	(b) This section expires September 1, 2025.
89	89	Sec. 2210.081. PAYMENT OF EXCESS LOSSES. (a) If, in a
90	90	catastrophe year, an occurrence or series of occurrences in a
91	91	catastrophe area results in insured losses and operating expenses
92	92	of the association in excess of premium and other revenue of the
93	93	association, the excess losses and operating expenses shall be paid
94	94	as provided by this subchapter.
95	95	(b) The association may not pay insured losses and operating
96	96	expenses resulting from an occurrence or series of occurrences in a
97	97	catastrophe year with premium and other revenue earned in a
98	98	subsequent year.
99	99	Sec. 2210.082. PAYMENT FROM RESERVES AND TRUST FUND. The
100	100	association shall pay insured losses and operating expenses
101	101	resulting from an occurrence or series of occurrences in a
102	102	catastrophe year in excess of premium and other revenue of the
103	103	association for that catastrophe year from reserves of the
104	104	association available before or accrued during that catastrophe
105	105	year and amounts in the catastrophe reserve trust fund available
106	106	before or accrued during that catastrophe year.
107	107	Sec. 2210.083. PAYMENT FROM MEMBER ASSESSMENTS. (a)
108	108	Insured losses and operating expenses for a catastrophe year not
109	109	paid under Section 2210.082 shall be paid as provided by this
110	110	section from member assessments not to exceed $1 billion for that
111	111	catastrophe year.
112	112	(b) The board of directors shall notify each association
113	113	member of the amount of the member's assessment under this section.
114	114	The proportion of the insured losses and operating expenses
115	115	allocable to each insurer under this section shall be determined in
116	116	the manner used to determine each insurer's participation in the
117	117	association for the year under Section 2210.052.
118	118	(c) An association member may not recoup an assessment paid
119	119	under this section through a premium surcharge or tax credit.
120	120	Sec. 2210.084. REINSURANCE BY MEMBERS FOR MEMBER
121	121	ASSESSMENTS. (a) Before any occurrence or series of occurrences,
122	122	an association member may purchase reinsurance to cover an
123	123	assessment for which the member would otherwise be liable under
124	124	this subchapter.
125	125	(b) An association member must notify the board of
126	126	directors, in the manner prescribed by the association, whether the
127	127	member will be purchasing reinsurance. If the member does not
128	128	purchase reinsurance under this section, the member remains liable
129	129	for any assessment imposed under this subchapter.
130	130	SECTION 1.08. Section 2210.452(b), Insurance Code, is
131	131	amended to read as follows:
132	132	(b) All money, including investment income, deposited in
133	133	the trust fund constitutes state funds until disbursed as provided
134	134	by this chapter and commissioner rules. The comptroller shall hold
135	135	the money outside the state treasury on behalf of, and with legal
136	136	title in, the department on behalf of the association. The
137	137	department shall keep and maintain the trust fund in accordance
138	138	with this chapter and commissioner rules. The comptroller, as
139	139	custodian of the trust fund, shall administer the trust fund
140	140	strictly and solely as provided by this chapter and commissioner
141	141	rules. The association may include the amounts held in the
142	142	catastrophe reserve trust fund as an admitted asset in the
143	143	financial statements of the association.
144	144	SECTION 1.09. Section 2210.4521(a), Insurance Code, is
145	145	amended to read as follows:
146	146	(a) The comptroller shall invest in accordance with the
147	147	investment standard described by Section 404.024(j), Government
148	148	Code, the portion of the trust fund balance that exceeds the amount
149	149	of the sufficient balance determined under Subsection (b). The
150	150	comptroller's investment of that portion of the balance is not
151	151	subject to any other limitation or other requirement provided by
152	152	Section 404.024, Government Code. The Texas Treasury Safekeeping
153	153	Trust Company and board of directors may recommend investments to
154	154	protect the trust fund and create investment income.
155	155	SECTION 1.10. Sections 2210.453(d) and (e), Insurance Code,
156	156	are amended to read as follows:
157	157	(d) The association shall obtain reinsurance at any level
158	158	including excess of loss, quota share, and other forms of
159	159	reinsurance to protect the solvency of the association. In
160	160	determining the amount of required reinsurance, the association
161	161	shall consider maintaining or protecting a minimum balance of $250
162	162	million in the catastrophe reserve trust fund. The commissioner
163	163	may consult with the board of directors regarding methods to
164	164	protect the solvency and continued viability of the association,
165	165	including by protecting the minimum balance, acquiring
166	166	reinsurance, or by other means [The cost of the reinsurance
167	167	purchased or alternative financing mechanisms used under this
168	168	section in excess of the minimum funding level required by
169	169	Subsection (b) shall be paid by assessments as provided by this
170	170	subsection. The association, with the approval of the
171	171	commissioner, shall notify each member of the association of the
172	172	amount of the member's assessment under this subsection. The
173	173	proportion of the cost to each insurer under this subsection shall
174	174	be determined in the manner used to determine each insurer's
175	175	participation in the association for the year under Section
176	176	2210.052].
177	177	(e) The commissioner may adopt a method or approve the
178	178	association's method of determining the probability of one in 100
179	179	for association risks. The commissioner shall provide any adopted
180	180	or approved method to the association on or before February 1 of
181	181	each year [A member of the association may not recoup an assessment
182	182	paid under Subsection (d) through a premium surcharge or tax
183	183	credit].
184	184	SECTION 1.11. Section 2210.601, Insurance Code, is amended
185	185	to read as follows:
186	186	Sec. 2210.601. FINDINGS [PURPOSE]. The legislature finds
187	187	that for losses incurred before January 1, 2024, the authorization
188	188	of [authorizing] the continued issuance of public securities to
189	189	provide a method to raise funds to provide windstorm and hail
190	190	insurance through the association in certain designated portions of
191	191	the state is for the benefit of the public and in furtherance of a
192	192	public purpose.
193	193	SECTION 1.12. Subchapter M, Chapter 2210, Insurance Code,
194	194	is amended by adding Section 2210.6015 to read as follows:
195	195	Sec. 2210.6015. APPLICABILITY OF SUBCHAPTER. To provide
196	196	for a reasonable transition, the association may issue public
197	197	securities under this subchapter if the association needs to
198	198	provide funds for excess losses and operating expenses incurred by
199	199	the association before January 1, 2024, for a catastrophe year
200	200	occurring before January 1, 2024. After December 31, 2023, the
201	201	association may not issue public securities under this subchapter
202	202	except to fund excess losses and operating expenses incurred before
203	203	January 1, 2024.
204	204	SECTION 1.13. Chapter 2210, Insurance Code, is amended by
205	205	adding Subchapters M-1 and M-2 to read as follows:
206	206	SUBCHAPTER M-1. CATASTROPHE INFRASTRUCTURE GRANT
207	207	Sec. 2210.631. CATASTROPHE INFRASTRUCTURE GRANT. (a) The
208	208	legislature has determined that providing an infrastructure grant
209	209	to the association to capitalize the catastrophe reserve trust fund
210	210	in an amount not more than $1 billion would provide the necessary
211	211	infrastructure for insuring catastrophic risks.
212	212	(b) The governor, in consultation with the commissioner,
213	213	lieutenant governor, and speaker of the house of representatives,
214	214	may authorize an infrastructure grant to the association consistent
215	215	with this subchapter under any act appropriating or authorizing the
216	216	grant of money for infrastructure improvements.
217	217	Sec. 2210.632. CATASTROPHE INFRASTRUCTURE GRANT PROCEEDS.
218	218	The proceeds of a catastrophe infrastructure grant authorized under
219	219	this subchapter shall be deposited in the catastrophe reserve trust
220	220	fund.
221	221	SUBCHAPTER M-2. CONTINGENT HURRICANE SURCHARGE
222	222	Sec. 2210.641. DEFINITION. In this subchapter,
223	223	"catastrophic event" means an occurrence or a series of occurrences
224	224	that:
225	225	(1) occurs in a catastrophe area during a calendar
226	226	year; and
227	227	(2) results in insured losses and operating expenses
228	228	of the association in excess of premium and other revenue of the
229	229	association.
230	230	Sec. 2210.642. APPLICABILITY OF SUBCHAPTER. (a)
231	231	Notwithstanding Section 2210.006, this subchapter applies to an
232	232	insurer that is:
233	233	(1) an insurer authorized to engage in the business of
234	234	insurance in this state that is required to be a member of the
235	235	association, including a farm mutual insurance company that is a
236	236	fronting insurer as defined by Section 221.001(c);
237	237	(2) a farm mutual insurance company that is not a
238	238	fronting insurer as defined by Section 221.001(c) only for purposes
239	239	of the collection of surcharges authorized by this subchapter;
240	240	(3) an unaffiliated eligible surplus lines insurer
241	241	writing the lines of business subject to a premium surcharge under
242	242	this subchapter;
243	243	(4) the association; and
244	244	(5) the FAIR Plan Association.
245	245	(b) A premium surcharge under this subchapter applies to:
246	246	(1) a policy written under the following lines of
247	247	insurance:
248	248	(A) fire and allied lines;
249	249	(B) farm and ranch owners; and
250	250	(C) residential property insurance; and
251	251	(2) the property insurance portion of a commercial
252	252	multiple peril insurance policy.
253	253	Sec. 2210.6425. CONSTRUCTION OF SUBCHAPTER. (a) This
254	254	subchapter may not be construed to require an insurer to be an
255	255	association member if the insurer is not otherwise required to be a
256	256	member under Section 2210.052.
257	257	(b) A farm mutual insurance company that is not a fronting
258	258	insurer as defined by Section 221.001(c) is not a member of the
259	259	association as a result of the company's collection of surcharges
260	260	authorized by this subchapter or for any other reason.
261	261	Sec. 2210.643. ANNUAL FINANCIAL REPORT BY COMMISSIONER.
262	262	The commissioner shall determine the amount available in the
263	263	catastrophe reserve trust fund as of December 31 of each year and
264	264	provide a written report to the governor, lieutenant governor, and
265	265	speaker of the house of representatives that includes:
266	266	(1) the amount available in the catastrophe reserve
267	267	trust fund; and
268	268	(2) information regarding the current financial
269	269	condition of the association.
270	270	Sec. 2210.6435. CONTINGENT HURRICANE SURCHARGES. (a) The
271	271	commissioner, in consultation with the board of directors, may
272	272	order a contingent hurricane surcharge as provided by this
273	273	subchapter only if the commissioner determines after a catastrophic
274	274	event that:
275	275	(1) the association has depleted its reserves, other
276	276	funds, and the catastrophe reserve trust fund; and
277	277	(2) the association has no other source of funding
278	278	reasonably available to provide adequate funding for the next
279	279	catastrophe year.
280	280	(b) The commissioner, in consultation with the board of
281	281	directors, shall set the contingent hurricane surcharge as a
282	282	percentage of premium to be collected by each insurer to which this
283	283	subchapter applies.
284	284	(c) The total amount authorized to be collected under this
285	285	section for any contingent hurricane surcharge may not exceed the
286	286	lesser of:
287	287	(1) the amount needed to recapitalize the catastrophe
288	288	reserve trust fund to $1 billion; or
289	289	(2) $1 billion.
290	290	(d) The contingent hurricane surcharge percentage must be
291	291	set in an amount sufficient to replenish the catastrophe reserve
292	292	trust fund to an aggregate amount of not more than $1 billion. The
293	293	commissioner may set the surcharge as a percentage of premium to
294	294	collect the needed aggregate amount over a period of time not to
295	295	exceed three years.
296	296	(e) The commissioner shall determine the period of time and
297	297	percentage to be applied subject to Subsection (d).
298	298	(f) A contingent hurricane surcharge authorized under this
299	299	section shall be assessed by insurers on all policyholders of
300	300	policies that are subject to this subchapter.
301	301	(g) A contingent hurricane surcharge under this subchapter
302	302	is a separate charge in addition to the premiums collected and is
303	303	not subject to premium tax or commissions.
304	304	(h) Failure by a policyholder to pay a contingent hurricane
305	305	surcharge constitutes failure to pay premium for purposes of policy
306	306	cancellation.
307	307	(i) A contingent hurricane surcharge is not refundable if
308	308	the policy is canceled or terminated.
309	309	Sec. 2210.644. CONTINGENT HURRICANE SURCHARGE PROCEEDS.
310	310	The proceeds of a contingent hurricane surcharge authorized under
311	311	this subchapter shall be deposited into the catastrophe reserve
312	312	trust fund.
313	313	Sec. 2210.6445. DISCLOSURE OF SURCHARGE. Each policy that
314	314	is assessed a surcharge under this subchapter shall contain the
315	315	following prominent disclosure in the documents attached to the
316	316	policy:
317	317	"A HURRICANE SURCHARGE HAS BEEN INCLUDED ON YOUR POLICY.
318	318	THIS SURCHARGE WILL BE USED TO PROVIDE FUNDS FOR THE TEXAS WINDSTORM
319	319	INSURANCE ASSOCIATION TO PAY FOR LOSSES AFTER A CATASTROPHIC EVENT,
320	320	INCLUDING A HURRICANE. THE SURCHARGE IS NOT REFUNDABLE IF YOU
321	321	CANCEL OR TERMINATE THIS POLICY."
322	322	Sec. 2210.645. EXEMPTION FROM TAXATION. A surcharge
323	323	collected under this subchapter is exempt from taxation by this
324	324	state or a municipality or other political subdivision of this
325	325	state.
326	326	Sec. 2210.6455. LIMITATION OF PERSONAL LIABILITY. The
327	327	association members, the insurers required to collect a surcharge
328	328	under this subchapter, members of the board of directors,
329	329	association employees, the commissioner, and department employees
330	330	are not personally liable as a result of exercising the rights and
331	331	responsibilities granted under this subchapter.
332	332	Sec. 2210.646. EXEMPTION FROM SURCHARGE. An insurer may
333	333	not collect a surcharge authorized under this subchapter on any
334	334	policy issued to this state, an agency of this state, or a political
335	335	subdivision of this state.
336	336	SECTION 1.14. Effective September 1, 2025, the following
337	337	provisions of the Insurance Code are repealed:
338	338	(1) Subchapter B-1, Chapter 2210; and
339	339	(2) Subchapter M, Chapter 2210.
340	340	SECTION 1.15. As soon as practicable after the effective
341	341	date of this Act and not later than December 1, 2023, the
342	342	commissioner of insurance shall adopt rules necessary to implement
343	343	Subchapters B-2 and M-2, Insurance Code, as added by this Act.
344	344	ARTICLE 2. CONFORMING AMENDMENTS
345	345	SECTION 2.01. Effective September 1, 2025, Section
346	346	2210.0081, Insurance Code, is amended to read as follows:
347	347	Sec. 2210.0081. CERTAIN ACTIONS BROUGHT AGAINST
348	348	ASSOCIATION BY COMMISSIONER. In an action brought by the
349	349	commissioner against the association under Chapter 441,[:
350	350	[(1) the association's inability to satisfy
351	351	obligations under Subchapter M related to the issuance of public
352	352	securities under this chapter constitutes a condition that makes
353	353	the association's continuation in business hazardous to the public
354	354	or to the association's policyholders for the purposes of Section
355	355	441.052;
356	356	[(2)] the time for the association to comply with the
357	357	requirements of supervision or for the conservator to complete the
358	358	conservator's duties, as applicable, is limited to three years from
359	359	the date the commissioner commences the action against the
360	360	association[; and
361	361	[(3) unless the commissioner takes further action
362	362	against the association under Chapter 441, as a condition of
363	363	release from supervision, the association must demonstrate to the
364	364	satisfaction of the commissioner that the association is able to
365	365	satisfy obligations under Subchapter M related to the issuance of
366	366	public securities under this chapter].
367	367	SECTION 2.02. (a) Section 2210.056(b), Insurance Code, is
368	368	amended to read as follows:
369	369	(b) The association's assets may not be used for or diverted
370	370	to any purpose other than to:
371	371	(1) satisfy, in whole or in part, the liability of the
372	372	association on claims made on policies written by the association;
373	373	(2) make investments authorized under applicable law;
374	374	(3) pay reasonable and necessary administrative
375	375	expenses incurred in connection with the operation of the
376	376	association and the processing of claims against the association;
377	377	(4) satisfy, in whole or in part, the obligations of
378	378	the association incurred in connection with Subchapters B-1, B-2,
379	379	J, [and] M, and M-2, including reinsurance, public securities, and
380	380	financial instruments; or
381	381	(5) make remittance under the laws of this state to be
382	382	used by this state to:
383	383	(A) pay claims made on policies written by the
384	384	association;
385	385	(B) purchase reinsurance covering losses under
386	386	those policies; or
387	387	(C) prepare for or mitigate the effects of
388	388	catastrophic natural events.
389	389	(b) Effective September 1, 2025, Sections 2210.056(b) and
390	390	(c), Insurance Code, are amended to read as follows:
391	391	(b) The association's assets may not be used for or diverted
392	392	to any purpose other than to:
393	393	(1) satisfy, in whole or in part, the liability of the
394	394	association on claims made on policies written by the association;
395	395	(2) make investments authorized under applicable law;
396	396	(3) pay reasonable and necessary administrative
397	397	expenses incurred in connection with the operation of the
398	398	association and the processing of claims against the association;
399	399	(4) satisfy, in whole or in part, the obligations of
400	400	the association incurred in connection with Subchapters B-2 [B-1],
401	401	J, and M-2 [M], including reinsurance[, public securities,] and
402	402	financial instruments; or
403	403	(5) make remittance under the laws of this state to be
404	404	used by this state to:
405	405	(A) pay claims made on policies written by the
406	406	association;
407	407	(B) purchase reinsurance covering losses under
408	408	those policies; or
409	409	(C) prepare for or mitigate the effects of
410	410	catastrophic natural events.
411	411	(c) On dissolution of the association, all assets of the
412	412	association[, other than assets pledged for the repayment of public
413	413	securities issued under this chapter,] revert to this state.
414	414	SECTION 2.03. (a) Section 2210.1052, Insurance Code, is
415	415	amended to read as follows:
416	416	Sec. 2210.1052. EMERGENCY MEETING. If the ultimate loss
417	417	estimate for an occurrence or series of occurrences made by the
418	418	chief financial officer or chief actuary of the association
419	419	indicates member insurers may be subject to an assessment under
420	420	Subchapter B-1 or B-2, the board of directors shall call an
421	421	emergency meeting to notify the member insurers about the
422	422	assessment.
423	423	(b) Effective September 1, 2025, Section 2210.1052,
424	424	Insurance Code, is amended to read as follows:
425	425	Sec. 2210.1052. EMERGENCY MEETING. If the ultimate loss
426	426	estimate for an occurrence or series of occurrences made by the
427	427	chief financial officer or chief actuary of the association
428	428	indicates member insurers may be subject to an assessment under
429	429	Subchapter B-2 [B-1], the board of directors shall call an
430	430	emergency meeting to notify the member insurers about the
431	431	assessment.
432	432	SECTION 2.04. Effective September 1, 2025, Section
433	433	2210.355(b), Insurance Code, is amended to read as follows:
434	434	(b) In adopting rates under this chapter, the following must
435	435	be considered:
436	436	(1) the past and prospective loss experience within
437	437	and outside this state of hazards for which insurance is made
438	438	available through the plan of operation, if any;
439	439	(2) expenses of operation, including acquisition
440	440	costs;
441	441	(3) a reasonable margin for profit and contingencies;
442	442	and
443	443	(4) [payment of public security obligations issued
444	444	under this chapter, including the additional amount of any debt
445	445	service coverage determined by the association to be required for
446	446	the issuance of marketable public securities; and
447	447	[(5)] all other relevant factors, within and outside
448	448	this state.
449	449	SECTION 2.05. (a) Section 2210.363(a), Insurance Code, is
450	450	amended to read as follows:
451	451	(a) The association may offer a person insured under this
452	452	chapter an actuarially justified premium discount on a policy
453	453	issued by the association, or an actuarially justified credit
454	454	against a surcharge assessed against the person, other than a
455	455	surcharge assessed under Subchapter M or M-2, if:
456	456	(1) the construction, alteration, remodeling,
457	457	enlargement, or repair of, or an addition to, insurable property
458	458	exceeds applicable building code standards set forth in the plan of
459	459	operation; or
460	460	(2) the person elects to purchase a binding
461	461	arbitration endorsement under Section 2210.554.
462	462	(b) Effective September 1, 2025, Section 2210.363(a),
463	463	Insurance Code, is amended to read as follows:
464	464	(a) The association may offer a person insured under this
465	465	chapter an actuarially justified premium discount on a policy
466	466	issued by the association, or an actuarially justified credit
467	467	against a surcharge assessed against the person, other than a
468	468	surcharge assessed under Subchapter M-2 [M], if:
469	469	(1) the construction, alteration, remodeling,
470	470	enlargement, or repair of, or an addition to, insurable property
471	471	exceeds applicable building code standards set forth in the plan of
472	472	operation; or
473	473	(2) the person elects to purchase a binding
474	474	arbitration endorsement under Section 2210.554.
475	475	SECTION 2.06. (a) Sections 2210.452(a) and (d), Insurance
476	476	Code, are amended to read as follows:
477	477	(a) The commissioner shall adopt rules under which the
478	478	association makes payments to the catastrophe reserve trust fund.
479	479	Except as otherwise specifically provided by this section, the
480	480	trust fund may be used only for purposes directly related to funding
481	481	the payment of insured losses, including:
482	482	(1) funding the obligations of the trust fund under
483	483	Subchapters [Subchapter] B-1 and B-2; and
484	484	(2) purchasing reinsurance or using alternative risk
485	485	financing mechanisms under Section 2210.453.
486	486	(d) The commissioner by rule shall establish the procedure
487	487	relating to the disbursement of money from the trust fund to
488	488	policyholders and for association administrative expenses directly
489	489	related to funding the payment of insured losses in the event of an
490	490	occurrence or series of occurrences within a catastrophe area that
491	491	results in a disbursement under Subchapter B-1 or B-2.
492	492	(b) Effective September 1, 2025, Sections 2210.452(a), (c),
493	493	and (d), Insurance Code, are amended to read as follows:
494	494	(a) The commissioner shall adopt rules under which the
495	495	association makes payments to the catastrophe reserve trust fund.
496	496	Except as otherwise specifically provided by this section, the
497	497	trust fund may be used only for purposes directly related to funding
498	498	the payment of insured losses, including:
499	499	(1) funding the obligations of the trust fund under
500	500	Subchapter B-2 [B-1]; and
501	501	(2) purchasing reinsurance or using alternative risk
502	502	financing mechanisms under Section 2210.453.
503	503	(c) At the end of each calendar year or policy year, the
504	504	association shall use the net gain from operations of the
505	505	association, including all premium and other revenue of the
506	506	association in excess of incurred losses and[,] operating expenses,
507	507	[public security obligations, and public security administrative
508	508	expenses,] to make payments to the trust fund, procure reinsurance,
509	509	or use alternative risk financing mechanisms, or to make payments
510	510	to the trust fund and procure reinsurance or use alternative risk
511	511	financing mechanisms.
512	512	(d) The commissioner by rule shall establish the procedure
513	513	relating to the disbursement of money from the trust fund to
514	514	policyholders and for association administrative expenses directly
515	515	related to funding the payment of insured losses in the event of an
516	516	occurrence or series of occurrences within a catastrophe area that
517	517	results in a disbursement under Subchapter B-2 [B-1].
518	518	SECTION 2.07. (a) Section 2210.453(c), Insurance Code, is
519	519	amended to read as follows:
520	520	(c) The attachment point for reinsurance purchased under
521	521	this section may not be less than the aggregate amount of all
522	522	funding available to the association under Subchapters
523	523	[Subchapter] B-1 and B-2.
524	524	(b) Effective September 1, 2025, Sections 2210.453(b) and
525	525	(c), Insurance Code, are amended to read as follows:
526	526	(b) The association shall maintain total available loss
527	527	funding in an amount not less than the probable maximum loss for the
528	528	association for a catastrophe year with a probability of one in 100.
529	529	If necessary, the required funding level shall be achieved through
530	530	the purchase of reinsurance or the use of alternative financing
531	531	mechanisms, or both, to operate in addition to or in concert with
532	532	the trust fund, [public securities,] financial instruments, and
533	533	assessments authorized by this chapter.
534	534	(c) The attachment point for reinsurance purchased under
535	535	this section may not be less than the aggregate amount of all
536	536	funding available to the association under Subchapter B-2 [B-1].
537	537	ARTICLE 3. TRANSITION AND SAVINGS PROVISIONS
538	538	SECTION 3.01. Notwithstanding the repeal by this Act of
539	539	Subchapters B-1 and M, Chapter 2210, Insurance Code, and other
540	540	changes in law made by this Act effective September 1, 2025:
541	541	(1) the payment of excess losses and operating
542	542	expenses of the Texas Windstorm Insurance Association incurred
543	543	before January 1, 2024, is governed by the law as it existed on the
544	544	effective date of this Act, and that law is continued in effect for
545	545	that purpose;
546	546	(2) the issuance of public securities to pay excess
547	547	losses and operating expenses of the Texas Windstorm Insurance
548	548	Association incurred before January 1, 2024, the use of the
549	549	proceeds of those securities, the repayment or refinancing of those
550	550	securities, and any other rights, obligations, or limitations with
551	551	respect to those securities and proceeds of those securities are
552	552	governed by the law as it existed on the effective date of this Act,
553	553	and that law is continued in effect for that purpose; and
554	554	(3) proceeds of any assessments made under Subchapter
555	555	B-1, Chapter 2210, Insurance Code, may not be included in reserves
556	556	available for a catastrophe year for purposes of Section 2210.082,
557	557	Insurance Code, as added by this Act, unless approved by the
558	558	commissioner of insurance.
559	559	ARTICLE 4. EFFECTIVE DATE
560	560	SECTION 4.01. Except as otherwise provided by this Act,
561	561	this Act takes effect September 1, 2023.