Texas 2025 - 89th Regular

Texas House Bill HB3689 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New		Differences
	1	+	89R6234 RDS-F
1	2		By: Hunter, Oliverson, Paul, Bonnen, H.B. No. 3689
2		-	Villalobos, et al.
3		-
4		-
	3	+	Villalobos
5	4
6	5
7	6		A BILL TO BE ENTITLED
8	7		AN ACT
9	8		relating to funding of excess losses and operating expenses of the
10	9		Texas Windstorm Insurance Association; authorizing an assessment;
11	10		authorizing a surcharge.
12	11		BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
13	12		ARTICLE 1. FUNDING OF INSURED LOSSES AND OPERATING EXPENSES OF
14	13		TEXAS WINDSTORM INSURANCE ASSOCIATION
15	14		SECTION 1.01. (a) In this section, "association" means the
16	15		Texas Windstorm Insurance Association.
17	16		(b) The legislature finds that the use of public securities
18	17		would not be an efficient or viable long-term method to fund losses
19	18		of the association in order for the association to continue to
20	19		provide windstorm and hail insurance after a catastrophic event.
21	20		Subchapter B-2, Chapter 2210, Insurance Code, as added by this Act,
22	21		is intended to replace Subchapter B-1, Chapter 2210, Insurance
23	22		Code, to provide for funding of excess losses and operating
24	23		expenses of the association incurred after December 31, 2025.
25	24		(c) The legislature finds that:
26	25		(1) previous experience has shown that the expense to
27	26		the association of issuing public securities, and the interest
28	27		rates for those securities, would be significant and can impose
29	28		significant long-term expense obligations on coastal property and
30	29		casualty risks that may be avoided if the legislature provides for
31	30		financing or investment from available state money to the
32	31		association before or after a catastrophic event;
33	32		(2) the financing or investment described by
34	33		Subdivision (1) of this subsection would be a more efficient way to
35	34		provide funding necessary for the association to pay losses after a
36	35		catastrophic event; and
37	36		(3) a loan or other investment from available state
38	37		money to the association of not more than $500 million before a
39	38		catastrophic event and not more than $1 billion after a
40	39		catastrophic event would:
41	40		(A) replace the funding levels currently
42	41		provided by issuing public securities;
43	42		(B) be consistent with sound insurance solvency
44	43		standards;
45	44		(C) provide a more viable method for the
46	45		association to have money for losses after a catastrophic event
47	46		than the issuance of public securities; and
48	47		(D) provide a secured investment for the state
49	48		that would:
50	49		(i) yield interest income for the state on
51	50		state money; and
52	51		(ii) be adequately secured for repayment
53	52		through statewide catastrophe surcharges on certain insurance
54	53		policies in this state.
55	54		(d) The legislature finds that authorizing catastrophe
56	55		surcharges is a viable method to assure repayment of loans or
57	56		investments of state money after a hurricane and to ensure that the
58	57		association can continue to provide windstorm and hail insurance in
59	58		the coastal areas of this state after a catastrophic event to
60	59		maintain the association's viability for the benefit of the public
61	60		and in furtherance of a public purpose.
62	61		SECTION 1.02. The heading to Subchapter B-1, Chapter 2210,
63	62		Insurance Code, is amended to read as follows:
64	63		SUBCHAPTER B-1. PAYMENT OF LOSSES INCURRED BEFORE JANUARY 1, 2026
65	64		SECTION 1.03. Subchapter B-1, Chapter 2210, Insurance Code,
66	65		is amended by adding Section 2210.070 to read as follows:
67	66		Sec. 2210.070. APPLICABILITY OF SUBCHAPTER. (a) This
68	67		subchapter applies only to the payment of losses and operating
69	68		expenses of the association for a catastrophe year that occurs
70	69		before January 1, 2026, and results in excess losses and operating
71	70		expenses incurred by the association before January 1, 2026.
72	71		(b) Payment of excess losses and operating expenses of the
73	72		association incurred after December 31, 2025, shall be paid as
74	73		provided by Subchapter B-2.
75		-	SECTION 1.04. Section 2210.071, Insurance Code, is amended
76		-	to read as follows:
77		-	Sec. 2210.071. PAYMENT OF EXCESS LOSSES. (a) If, in a
78		-	catastrophe year before January 1, 2026, an occurrence or series of
79		-	occurrences in a catastrophe area results in insured losses and
80		-	operating expenses of the association in excess of premium and
81		-	other revenue of the association, the excess losses and operating
82		-	expenses shall be paid as provided by this subchapter.
83		-	(b) The association may not pay insured losses and operating
84		-	expenses resulting from an occurrence or series of occurrences in a
85		-	catastrophe year in excess of premium and other revenue of the
86		-	association for that catastrophe year with premium and other
87		-	revenue earned in a subsequent year.
	74	+	SECTION 1.04. Section 2210.071(a), Insurance Code, is
	75	+	amended to read as follows:
	76	+	(a) If, in a catastrophe year before January 1, 2026, an
	77	+	occurrence or series of occurrences in a catastrophe area results
	78	+	in insured losses and operating expenses of the association in
	79	+	excess of premium and other revenue of the association, the excess
	80	+	losses and operating expenses shall be paid as provided by this
	81	+	subchapter.
88	82		SECTION 1.05. Section 2210.0715(b), Insurance Code, is
89	83		amended to read as follows:
90	84		(b) Proceeds of public securities issued, a financing
91	85		arrangement entered into, or assessments made before January 1,
92	86		2026, or as a result of any occurrence or series of occurrences in a
93	87		catastrophe year that occurs before January 1, 2026, and results in
94	88		insured losses before that date may not be included in reserves
95	89		available for a subsequent catastrophe year for purposes of this
96	90		section or Section 2210.082 unless approved by the commissioner.
97	91		SECTION 1.06. The heading to Section 2210.075, Insurance
98	92		Code, is amended to read as follows:
99	93		Sec. 2210.075. REINSURANCE BY MEMBERS.
100	94		SECTION 1.07. Subchapter B-1, Chapter 2210, Insurance Code,
101	95		is amended by adding Section 2210.076 to read as follows:
102	96		Sec. 2210.076. PAYMENT FROM STATE-FUNDED FINANCING
103	97		ARRANGEMENTS. (a) Notwithstanding the provisions of this
104	98		subchapter to the contrary, the association may pay losses the
105	99		association would otherwise pay as provided by Section 2210.072,
106	100		2210.073, or 2210.0741 by borrowing from, or entering into other
107	101		financing arrangements with, this state as provided by Subchapter
108	102		M-1 and Section 404.0242, Government Code.
109	103		(b) Subchapter M-2 applies to the financing of losses under
110	104		this section to the extent necessary to secure and repay a debt
111	105		obligation to the state under a financing arrangement entered into
112	106		with this state under this section.
113	107		(c) A financing arrangement described by Subsection (a) may
114	108		also be used for a purpose described by Section 2210.072(d) in the
115	109		same manner as a financing arrangement with a market source.
116	110		SECTION 1.08. Chapter 2210, Insurance Code, is amended by
117	111		adding Subchapter B-2 to read as follows:
118	112		SUBCHAPTER B-2. PAYMENT OF EXCESS LOSSES AND OPERATING EXPENSES
119	113		Sec. 2210.080. APPLICABILITY OF SUBCHAPTER. (a) This
120	114		subchapter applies only to the payment of losses and operating
121	115		expenses of the association for a catastrophe year that occurs
122	116		after December 31, 2025, and results in excess losses and operating
123	117		expenses incurred by the association after December 31, 2025.
124	118		(b) This section expires September 1, 2027.
125	119		Sec. 2210.081. PAYMENT OF EXCESS LOSSES. (a) If, in a
126	120		catastrophe year, an occurrence or series of occurrences in a
127	121		catastrophe area results in insured losses and operating expenses
128	122		of the association in excess of premium and other revenue of the
129	123		association, the excess losses and operating expenses shall be paid
130	124		as provided by this subchapter.
131	125		(b) The association may not pay insured losses and operating
132	126		expenses resulting from an occurrence or series of occurrences in a
133		-	catastrophe year in excess of premium and other revenue of the
134		-	association for that catastrophe year with premium and other
135		-	revenue earned in a subsequent year.
	127	+	catastrophe year with premium and other revenue earned in a
	128	+	subsequent year.
136	129		Sec. 2210.082. PAYMENT FROM RESERVES AND TRUST FUND;
137	130		STATE-FUNDED FINANCING ARRANGEMENTS. (a) The association shall
138	131		pay insured losses and operating expenses resulting from an
139	132		occurrence or series of occurrences in a catastrophe year in excess
140	133		of premium and other revenue of the association for that
141	134		catastrophe year from reserves of the association available before
142	135		or accrued during that catastrophe year and amounts in the
143	136		catastrophe reserve trust fund available before or accrued during
144	137		that catastrophe year.
145	138		(b) For insured losses and operating expenses for a
146	139		catastrophe year not paid under Subsection (a), the association
147	140		shall arrange for financing of not more than $1 billion through one
148	141		or more financing arrangements entered into with the state as
149	142		provided by Subchapter M-1 and Section 404.0242, Government Code.
150	143		Sec. 2210.083. PAYMENT FROM MEMBER ASSESSMENTS. (a)
151	144		Insured losses and operating expenses for a catastrophe year not
152	145		paid under Section 2210.082 shall be paid as provided by this
153	146		section from member assessments not to exceed $1 billion for that
154	147		catastrophe year.
155	148		(b) The board of directors shall notify each association
156	149		member of the amount of the member's assessment under this section.
157	150		The proportion of the insured losses and operating expenses
158	151		allocable to each insurer under this section shall be determined in
159	152		the manner used to determine each insurer's participation in the
160	153		association for the year under Section 2210.052.
161	154		(c) An association member may not recoup an assessment paid
162	155		under this section through a premium surcharge or tax credit.
163	156		Sec. 2210.084. REINSURANCE BY MEMBERS FOR MEMBER
164	157		ASSESSMENTS. (a) Before any occurrence or series of occurrences,
165	158		an association member may purchase reinsurance to cover an
166	159		assessment for which the member would otherwise be liable under
167	160		this subchapter.
168	161		(b) An association member must notify the board of
169	162		directors, in the manner prescribed by the association, whether the
170	163		member will be purchasing reinsurance. If the member does not
171	164		purchase reinsurance under this section, the member remains liable
172	165		for any assessment imposed under this subchapter.
173	166		SECTION 1.09. Section 2210.452(b), Insurance Code, is
174	167		amended to read as follows:
175	168		(b) All money, including investment income, deposited in
176	169		the trust fund constitutes state funds until disbursed as provided
177	170		by this chapter and commissioner rules. The comptroller shall hold
178	171		the money outside the state treasury on behalf of, and with legal
179	172		title in, the department on behalf of the association. The
180	173		department shall keep and maintain the trust fund in accordance
181	174		with this chapter and commissioner rules. The comptroller, as
182	175		custodian of the trust fund, shall administer the trust fund
183	176		strictly and solely as provided by this chapter and commissioner
184	177		rules. The association may include the amounts held in the
185	178		catastrophe reserve trust fund as an admitted asset in the
186	179		financial statements of the association.
187		-	SECTION 1.10. Section 2210.4521, Insurance Code, is amended
188		-	by amending Subsection (a) and adding Subsection (a-1) to read as
189		-	follows:
	180	+	SECTION 1.10. Section 2210.4521(a), Insurance Code, is
	181	+	amended to read as follows:
190	182		(a) The comptroller shall invest in accordance with the
191	183		investment standard described by Section 404.024(j), Government
192	184		Code, the portion of the trust fund balance that exceeds the amount
193		-	of the sufficient balance determined under Subsection (b).
194		-	~~(a-1) The~~ comptroller's investment of that portion of the
195		-	~~balance is not~~ subject to any other limitation or other requirement
196		-	~~provided by~~ Section 404.024, Government Code. The ~~comptroller and~~
197		-	board of directors may recommend investments to ~~protect the trust~~
198		-	fund and create investment income.
	185	+	of the sufficient balance determined under Subsection (b). The
	186	+	comptroller's investment of that portion of the balance is not
	187	+	subject to any other limitation or other requirement provided by
	188	+	Section 404.024, Government Code. The Texas Treasury Safekeeping
	189	+	Trust Company and board of directors may recommend investments to
	190	+	protect the trust fund and create investment income.
199	191		SECTION 1.11. Sections 2210.453(d) and (e), Insurance Code,
200	192		are amended to read as follows:
201	193		(d) The association may obtain reinsurance at any level
202	194		including excess of loss, quota share, and other forms of
203	195		reinsurance to protect the solvency and viability of the
204	196		association. The commissioner may consult with the board of
205	197		directors regarding methods to protect the solvency and continued
206	198		viability of the association, including by protecting the minimum
207	199		balance, acquiring reinsurance, or by other means [The cost of the
208	200		reinsurance purchased or alternative financing mechanisms used
209	201		under this section in excess of the minimum funding level required
210	202		by Subsection (b) shall be paid by assessments as provided by this
211	203		subsection. The association, with the approval of the
212	204		commissioner, shall notify each member of the association of the
213	205		amount of the member's assessment under this subsection. The
214	206		proportion of the cost to each insurer under this subsection shall
215	207		be determined in the manner used to determine each insurer's
216	208		participation in the association for the year under Section
217	209		2210.052].
218	210		(e) The commissioner may adopt a method or approve the
219	211		association's method of determining the probability of one in 100
220	212		for association risks. The commissioner shall provide any adopted
221	213		or approved method to the association on or before February 1 of
222	214		each year [A member of the association may not recoup an assessment
223	215		paid under Subsection (d) through a premium surcharge or tax
224	216		credit].
225	217		SECTION 1.12. Section 2210.601, Insurance Code, is amended
226	218		to read as follows:
227	219		Sec. 2210.601. FINDINGS [PURPOSE]. The legislature finds
228	220		that for losses incurred before January 1, 2026, authorizing the
229	221		association to enter into financing arrangements with this state as
230	222		provided by Section 2210.076 [issuance of public securities] to
231	223		provide a method to raise funds to provide windstorm and hail
232	224		insurance through the association in certain designated portions of
233	225		the state is for the benefit of the public and in furtherance of a
234	226		public purpose.
235	227		SECTION 1.13. Subchapter M, Chapter 2210, Insurance Code,
236	228		is amended by adding Section 2210.6015 to read as follows:
237	229		Sec. 2210.6015. APPLICABILITY OF SUBCHAPTER. To provide
238	230		for a reasonable transition, the association may issue public
239	231		securities under this subchapter or enter into financing
240	232		arrangements with this state as provided by Section 2210.076 if the
241	233		association needs to provide funds for excess losses and operating
242	234		expenses incurred by the association before January 1, 2026, for a
243	235		catastrophe year occurring before January 1, 2026. After December
244	236		31, 2025, the association may not issue public securities under
245	237		this subchapter except to fund excess losses and operating expenses
246	238		incurred before January 1, 2026.
247	239		SECTION 1.14. Chapter 2210, Insurance Code, is amended by
248	240		adding Subchapters M-1 and M-2 to read as follows:
249	241		SUBCHAPTER M-1. STATE-FUNDED CATASTROPHE FINANCING ARRANGEMENTS
250	242		Sec. 2210.631. STATE-FUNDED CATASTROPHE FINANCING
251	243		ARRANGEMENTS. The legislature has determined that providing
252	244		catastrophe funding to the association by permitting the
253	245		association to enter into a financing arrangement with this state
254	246		is an acceptable use of state money and provides an efficient method
255	247		for the association to pay losses following a catastrophic event.
256	248		Sec. 2210.632. PROCEEDS OF CATASTROPHE FINANCING
257	249		ARRANGEMENT. The proceeds of a catastrophe financing arrangement
258	250		with this state entered into under this subchapter before a
259	251		catastrophic event shall be deposited in the catastrophe reserve
260	252		trust fund.
261	253		Sec. 2210.633. CATASTROPHE FINANCING ARRANGEMENT
262	254		AUTHORIZED; LIMITS. (a) The association may enter into a financing
263	255		arrangement with this state as provided by Section 404.0242,
264	256		Government Code:
265	257		(1) before a catastrophic event, for not more than
266	258		$500 million; and
267	259		(2) after a catastrophic event that depletes the
268	260		catastrophe reserve fund, for not more than $1 billion.
269	261		(b) The amount available under Subsection (a)(2) is reduced
270	262		by the amount of any outstanding pre-event or post-event financing
271	263		obtained by the association under this section.
272	264		SUBCHAPTER M-2. CATASTROPHE SURCHARGE
273	265		Sec. 2210.641. DEFINITION. In this subchapter,
274	266		"catastrophic event" means an occurrence or a series of occurrences
275	267		that:
276	268		(1) occurs in a catastrophe area during a calendar
277	269		year; and
278	270		(2) results in insured losses and operating expenses
279	271		of the association in excess of premium and other revenue of the
280	272		association.
281	273		Sec. 2210.642. APPLICABILITY OF SUBCHAPTER. (a)
282	274		Notwithstanding Section 2210.006, this subchapter applies to an
283	275		insurer that is:
284	276		(1) an insurer authorized to engage in the business of
285	277		insurance in this state that is required to be a member of the
286	278		association, including a farm mutual insurance company that is a
287	279		fronting insurer as defined by Section 221.001(c);
288	280		(2) a farm mutual insurance company that is not a
289	281		fronting insurer as defined by Section 221.001(c) only for purposes
290	282		of the collection of surcharges authorized by this subchapter;
291	283		(3) an unaffiliated eligible surplus lines insurer
292	284		writing the lines of business subject to a premium surcharge under
293	285		this subchapter;
294	286		(4) the association; and
295	287		(5) the FAIR Plan Association.
296	288		(b) A premium surcharge under this subchapter applies to:
297	289		(1) a policy written under the following lines of
298	290		insurance:
299	291		(A) fire and allied lines;
300	292		(B) farm and ranch owners; and
301	293		(C) residential property insurance; and
302	294		(2) the property insurance portion of a commercial
303	295		multiple peril insurance policy.
304	296		Sec. 2210.6425. CONSTRUCTION OF SUBCHAPTER. (a) This
305	297		subchapter may not be construed to require an insurer to be an
306	298		association member if the insurer is not otherwise required to be a
307	299		member under Section 2210.052.
308	300		(b) A farm mutual insurance company that is not a fronting
309	301		insurer as defined by Section 221.001(c) is not a member of the
310	302		association as a result of the company's collection of surcharges
311	303		authorized by this subchapter or for any other reason.
312	304		Sec. 2210.643. ANNUAL FINANCIAL REPORT BY COMMISSIONER.
313	305		The commissioner shall determine the amount available in the
314	306		catastrophe reserve trust fund as of December 31 of each year and
315	307		provide a written report to the governor, lieutenant governor, and
316	308		speaker of the house of representatives that includes:
317	309		(1) the amount available in the catastrophe reserve
318	310		trust fund; and
319	311		(2) information regarding the current financial
320	312		condition of the association.
321	313		Sec. 2210.6435. CATASTROPHE SURCHARGES. (a) The
322		-	commissioner, in consultation with the board of directors ~~and the~~
323		-	~~comptroller, may~~ order a catastrophe surcharge as provided by this
324		-	~~subchapter only~~ if:
	314	+	commissioner, in consultation with the board of directors, may
	315	+	order a catastrophe surcharge as provided by this subchapter only
	316	+	if:
325	317		(1) before a catastrophic event, the association
326	318		enters into a financing arrangement with this state that is the
327	319		basis for the surcharge under Subchapter M-1; or
328	320		(2) after a catastrophic event:
329	321		(A) the commissioner determines that the
330	322		association has depleted its reserves, other money, and the
331	323		catastrophe reserve trust fund; and
332	324		(B) the association enters into a financing
333	325		arrangement with this state that is the basis for the surcharge
334	326		under Subchapter M-1.
335	327		(b) The commissioner, in consultation with the board of
336		-	directors ~~and the comptroller~~, shall set the catastrophe surcharge
337		-	~~as a percentage of~~ premium to be collected by each insurer to which
338		-	~~this subchapter~~ applies.
	328	+	directors, shall set the catastrophe surcharge as a percentage of
	329	+	premium to be collected by each insurer to which this subchapter
	330	+	applies.
339	331		(c) The total amount authorized to be collected under this
340	332		section for any catastrophe surcharge may not exceed the amount
341	333		needed to repay the debt obligation to the state under the financing
342	334		arrangement entered into with this state under Subchapter M-1 that
343	335		is the basis for the surcharge.
344	336		(d) The catastrophe surcharge percentage must be set in an
345	337		amount sufficient to repay the debt obligation to the state under
346	338		the financing arrangement entered into with this state under
347	339		Subchapter M-1 that is the basis for the surcharge. The
348	340		commissioner may set the surcharge as a percentage of premium to
349	341		collect the needed aggregate amount over a period of time not to
350	342		exceed three years.
351	343		(e) A catastrophe surcharge authorized under this section
352	344		shall be assessed by insurers on all policyholders of policies that
353	345		are subject to this subchapter.
354	346		(f) A catastrophe surcharge under this subchapter is a
355	347		separate charge in addition to the premiums collected and is not
356	348		subject to premium tax or commissions.
357	349		(g) Failure by a policyholder to pay a catastrophe surcharge
358	350		constitutes failure to pay premium for purposes of policy
359	351		cancellation.
360	352		(h) A catastrophe surcharge is not refundable if the policy
361	353		is canceled or terminated.
362	354		Sec. 2210.644. CATASTROPHE SURCHARGE PROCEEDS. The
363	355		proceeds of a catastrophe surcharge authorized under this
364	356		subchapter shall be deposited into the catastrophe reserve trust
365	357		fund or an account designated by the comptroller for purposes of
366	358		repayment of the association's debt obligation to the state under
367	359		the financing arrangement that is the basis for the surcharge.
368	360		Sec. 2210.6445. DISCLOSURE OF SURCHARGE. Each policy that
369	361		is assessed a surcharge under this subchapter shall contain the
370	362		following prominent disclosure in the documents attached to the
371	363		policy:
372	364		"A CATASTROPHE SURCHARGE HAS BEEN INCLUDED ON YOUR POLICY.
373	365		THIS SURCHARGE WILL BE USED TO REPAY STATE MONEY USED BY THE TEXAS
374	366		WINDSTORM INSURANCE ASSOCIATION TO PAY FOR LOSSES AFTER A
375	367		CATASTROPHIC EVENT, INCLUDING A HURRICANE. THE SURCHARGE IS NOT
376	368		REFUNDABLE IF YOU CANCEL OR TERMINATE THIS POLICY."
377	369		Sec. 2210.645. EXEMPTION FROM TAXATION. A surcharge
378	370		collected under this subchapter is exempt from taxation by this
379	371		state or a municipality or other political subdivision of this
380	372		state.
381	373		Sec. 2210.6455. LIMITATION OF PERSONAL LIABILITY. The
382	374		association members, the insurers required to collect a surcharge
383	375		under this subchapter, members of the board of directors,
384	376		association employees, the commissioner, and department employees
385	377		are not personally liable as a result of exercising the rights and
386	378		responsibilities granted under this subchapter.
387	379		Sec. 2210.646. EXEMPTION FROM SURCHARGE. An insurer may
388	380		not collect a surcharge authorized under this subchapter on any
389	381		policy issued to this state, an agency of this state, or a political
390	382		subdivision of this state.
391	383		SECTION 1.15. Subchapter C, Chapter 404, Government Code,
392	384		is amended by adding Section 404.0242 to read as follows:
393	385		Sec. 404.0242. INVESTMENT IN WINDSTORM CATASTROPHE
394		-	FINANCING ARRANGEMENTS. (a) The comptroller shall invest certain
395		-	economic stabilization fund balances to provide a financing
396		-	arrangement for losses of the Texas Windstorm Insurance Association
397		-	in accordance with this section and Chapter 2210, Insurance Code.
398		-	For the purpose of investing the assets of the economic
399		-	stabilization fund under this section, the comptroller may acquire,
400		-	exchange, sell, supervise, manage, or retain any kind of investment
401		-	that a prudent investor exercising reasonable care, skill, and
402		-	caution would acquire, exchange, sell, supervise, manage, or retain
403		-	in light of the purposes, terms, distribution requirements, and
404		-	other circumstances then prevailing for the economic stabilization
405		-	fund, taking into consideration the investment of all the assets of
406		-	the fund rather than a single investment.
	386	+	FINANCING ARRANGEMENTS. (a) The comptroller shall invest state
	387	+	money to provide financing for losses of the Texas Windstorm
	388	+	Insurance Association in accordance with this section and Chapter
	389	+	2210, Insurance Code.
407	390		(b) For purposes of this section, the comptroller may enter
408		-	into an appropriate financing arrangement or debt obligation with
409		-	the Texas Windstorm Insurance Association to provide the
410		-	association up to $500 million in funding before a catastrophic
411		-	event and up to $1 billion in funding after a catastrophic event to
412		-	fund the losses of the association arising from the catastrophic
413		-	event. Financing provided under this section must be secured and
414		-	repaid by catastrophe surcharges under Subchapter M-2, Chapter
415		-	2210, Insurance Code. For purposes of this chapter and subchapter,
416		-	the terms "debt obligation" and "financing arrangement" include all
417		-	outstanding principal, interest, and related financing and
418		-	administrative expenses in issuing a debt obligation or financing
419		-	arrangement.
420		-	(c) The interest rate charged in connection with a financing
421		-	arrangement or debt obligation entered into under this section
422		-	shall be calculated as the sum of:
423		-	(1) the current market rate of a United States
424		-	Treasury Security of comparable maturity, as determined by the
425		-	comptroller; and
	391	+	into an appropriate financing arrangement with the Texas Windstorm
	392	+	Insurance Association to provide the association up to $500 million
	393	+	in funding before a catastrophic event and up to $1 billion in
	394	+	funding after a catastrophic event to fund the losses of the
	395	+	association arising from the catastrophic event. Financing
	396	+	provided under this section must be secured and repaid by
	397	+	catastrophe surcharges under Subchapter M-2, Chapter 2210,
	398	+	Insurance Code.
	399	+	(c) If the terms of a financing arrangement entered into
	400	+	under this section include interest, the interest rate may not
	401	+	exceed the sum of:
	402	+	(1) the lesser of:
	403	+	(A) the rate set by the Federal Home Loan Bank
	404	+	Board; or
	405	+	(B) the federal funds rate as specified by
	406	+	Section 4A.506(b), Business & Commerce Code; and
426	407		(2) 2 percent.
427		-	(d) A debt obligation or financing arrangement entered into
428		-	under this section may not exceed 36 months to maturity and may
429		-	include a contractual coverage amount of at least 1.10 but not
430		-	greater than 1.25.
	408	+	(d) A debt obligation entered into under this section may
	409	+	not exceed 36 months to maturity.
431	410		(e) Notwithstanding any other law, directly or indirectly
432	411		through a separately managed account or other investment vehicle,
433		-	the comptroller may invest up to $1 billion of the economic
434		-	stabilization fund balance per catastrophe year to provide
435		-	financing under this section.
	412	+	the comptroller may use up to $1 billion of the economic
	413	+	stabilization fund balance to provide financing under this section.
436	414		(f) The aggregate amount of outstanding pre-event and
437		-	post-event financing provided under this section may not exceed $2
	415	+	post-event financing provided under this section may not exceed $1
438	416		billion.
439		-	(g) A person may not bring a civil action against this
440		-	state, the Texas Treasury Safekeeping Trust Company, or an
441		-	employee, independent contractor, or official of this state,
442		-	including the comptroller, for any claim, including breach of
443		-	fiduciary duty or violation of any constitutional, statutory, or
444		-	regulatory requirement, in connection with any action, inaction,
445		-	decision, divestment, investment, report, or other determination
446		-	made or taken in connection with this section. A person who brings
447		-	an action described by this subsection is liable to the defendant
448		-	for the defendant's costs and attorney's fees resulting from the
449		-	action.
450		-	(h) The comptroller shall manage the investments required
451		-	by this section as a separate investment portfolio. The comptroller
452		-	shall provide separate accounting and reporting for the investments
453		-	in that portfolio. The comptroller shall credit to that portfolio
454		-	all payments, distributions, interest, and other earnings on the
455		-	investments in that portfolio. The comptroller has any power
456		-	necessary to accomplish the purposes of managing and investing the
457		-	assets of this separate investment portfolio. In managing the
458		-	assets of that portfolio, through procedures and subject to
459		-	restrictions the comptroller considers appropriate, the
460		-	comptroller may acquire, sell, transfer, or otherwise assign the
461		-	investments as appropriate, taking into consideration the
462		-	purposes, terms, distribution requirements, and other
463		-	circumstances of that portfolio then prevailing.
464	417		SECTION 1.16. Effective September 1, 2027, the following
465	418		provisions of the Insurance Code are repealed:
466	419		(1) Subchapter B-1, Chapter 2210; and
467	420		(2) Subchapter M, Chapter 2210.
468	421		SECTION 1.17. As soon as practicable after the effective
469	422		date of this Act and not later than December 1, 2025, the
470	423		commissioner of insurance shall adopt rules necessary to implement
471	424		Subchapters B-2 and M-2, Insurance Code, as added by this Act.
472	425		ARTICLE 2. CONFORMING AMENDMENTS
473	426		SECTION 2.01. Effective September 1, 2027, Section
474	427		2210.0081, Insurance Code, is amended to read as follows:
475	428		Sec. 2210.0081. CERTAIN ACTIONS BROUGHT AGAINST
476	429		ASSOCIATION BY COMMISSIONER. In an action brought by the
477	430		commissioner against the association under Chapter 441,[:
478	431		[(1) the association's inability to satisfy
479	432		obligations under Subchapter M related to the issuance of public
480	433		securities under this chapter constitutes a condition that makes
481	434		the association's continuation in business hazardous to the public
482	435		or to the association's policyholders for the purposes of Section
483	436		441.052;
484	437		[(2)] the time for the association to comply with the
485	438		requirements of supervision or for the conservator to complete the
486	439		conservator's duties, as applicable, is limited to three years from
487	440		the date the commissioner commences the action against the
488	441		association[; and
489	442		[(3) unless the commissioner takes further action
490	443		against the association under Chapter 441, as a condition of
491	444		release from supervision, the association must demonstrate to the
492	445		satisfaction of the commissioner that the association is able to
493	446		satisfy obligations under Subchapter M related to the issuance of
494	447		public securities under this chapter].
495	448		SECTION 2.02. (a) Section 2210.056(b), Insurance Code, is
496	449		amended to read as follows:
497	450		(b) The association's assets may not be used for or diverted
498	451		to any purpose other than to:
499	452		(1) satisfy, in whole or in part, the liability of the
500	453		association on claims made on policies written by the association;
501	454		(2) make investments authorized under applicable law;
502	455		(3) pay reasonable and necessary administrative
503	456		expenses incurred in connection with the operation of the
504	457		association and the processing of claims against the association;
505	458		(4) satisfy, in whole or in part, the obligations of
506	459		the association incurred in connection with Subchapters B-1, B-2,
507	460		J, [and] M, and M-2, including reinsurance, public securities, and
508	461		financial instruments; or
509	462		(5) make remittance under the laws of this state to be
510	463		used by this state to:
511	464		(A) pay claims made on policies written by the
512	465		association;
513	466		(B) purchase reinsurance covering losses under
514	467		those policies; or
515	468		(C) prepare for or mitigate the effects of
516	469		catastrophic natural events.
517	470		(b) Effective September 1, 2027, Sections 2210.056(b) and
518	471		(c), Insurance Code, are amended to read as follows:
519	472		(b) The association's assets may not be used for or diverted
520	473		to any purpose other than to:
521	474		(1) satisfy, in whole or in part, the liability of the
522	475		association on claims made on policies written by the association;
523	476		(2) make investments authorized under applicable law;
524	477		(3) pay reasonable and necessary administrative
525	478		expenses incurred in connection with the operation of the
526	479		association and the processing of claims against the association;
527	480		(4) satisfy, in whole or in part, the obligations of
528	481		the association incurred in connection with Subchapters B-2 [B-1],
529	482		J, and M-2 [M], including reinsurance[, public securities,] and
530	483		financial instruments; or
531	484		(5) make remittance under the laws of this state to be
532	485		used by this state to:
533	486		(A) pay claims made on policies written by the
534	487		association;
535	488		(B) purchase reinsurance covering losses under
536	489		those policies; or
537	490		(C) prepare for or mitigate the effects of
538	491		catastrophic natural events.
539	492		(c) On dissolution of the association, all assets of the
540	493		association[, other than assets pledged for the repayment of public
541	494		securities issued under this chapter,] revert to this state.
542	495		SECTION 2.03. (a) Section 2210.1052, Insurance Code, is
543	496		amended to read as follows:
544	497		Sec. 2210.1052. EMERGENCY MEETING. If the ultimate loss
545	498		estimate for an occurrence or series of occurrences made by the
546	499		chief financial officer or chief actuary of the association
547	500		indicates member insurers may be subject to an assessment under
548	501		Subchapter B-1 or B-2, the board of directors shall call an
549	502		emergency meeting to notify the member insurers about the
550	503		assessment.
551	504		(b) Effective September 1, 2027, Section 2210.1052,
552	505		Insurance Code, is amended to read as follows:
553	506		Sec. 2210.1052. EMERGENCY MEETING. If the ultimate loss
554	507		estimate for an occurrence or series of occurrences made by the
555	508		chief financial officer or chief actuary of the association
556	509		indicates member insurers may be subject to an assessment under
557	510		Subchapter B-2 [B-1], the board of directors shall call an
558	511		emergency meeting to notify the member insurers about the
559	512		assessment.
560	513		SECTION 2.04. Effective September 1, 2027, Section
561	514		2210.355(b), Insurance Code, is amended to read as follows:
562	515		(b) In adopting rates under this chapter, the following must
563	516		be considered:
564	517		(1) the past and prospective loss experience within
565	518		and outside this state of hazards for which insurance is made
566	519		available through the plan of operation, if any;
567	520		(2) expenses of operation, including acquisition
568	521		costs;
569	522		(3) a reasonable margin for profit and contingencies;
570	523		and
571	524		(4) [payment of public security obligations issued
572	525		under this chapter, including the additional amount of any debt
573	526		service coverage determined by the association to be required for
574	527		the issuance of marketable public securities; and
575	528		[(5)] all other relevant factors, within and outside
576	529		this state.
577	530		SECTION 2.05. (a) Section 2210.363(a), Insurance Code, is
578	531		amended to read as follows:
579	532		(a) The association may offer a person insured under this
580	533		chapter an actuarially justified premium discount on a policy
581	534		issued by the association, or an actuarially justified credit
582	535		against a surcharge assessed against the person, other than a
583	536		surcharge assessed under Subchapter M or M-2, if:
584	537		(1) the construction, alteration, remodeling,
585	538		enlargement, or repair of, or an addition to, insurable property
586	539		exceeds applicable building code standards set forth in the plan of
587	540		operation; or
588	541		(2) the person elects to purchase a binding
589	542		arbitration endorsement under Section 2210.554.
590	543		(b) Effective September 1, 2027, Section 2210.363(a),
591	544		Insurance Code, is amended to read as follows:
592	545		(a) The association may offer a person insured under this
593	546		chapter an actuarially justified premium discount on a policy
594	547		issued by the association, or an actuarially justified credit
595	548		against a surcharge assessed against the person, other than a
596	549		surcharge assessed under Subchapter M-2 [M], if:
597	550		(1) the construction, alteration, remodeling,
598	551		enlargement, or repair of, or an addition to, insurable property
599	552		exceeds applicable building code standards set forth in the plan of
600	553		operation; or
601	554		(2) the person elects to purchase a binding
602	555		arbitration endorsement under Section 2210.554.
603	556		SECTION 2.06. (a) Sections 2210.452(a) and (d), Insurance
604	557		Code, are amended to read as follows:
605	558		(a) The commissioner shall adopt rules under which the
606	559		association makes payments to the catastrophe reserve trust fund.
607	560		Except as otherwise specifically provided by this section, the
608	561		trust fund may be used only for purposes directly related to funding
609	562		the payment of insured losses, including:
610	563		(1) funding the obligations of the trust fund under
611	564		Subchapters [Subchapter] B-1 and B-2; and
612	565		(2) purchasing reinsurance or using alternative risk
613	566		financing mechanisms under Section 2210.453.
614	567		(d) The commissioner by rule shall establish the procedure
615	568		relating to the disbursement of money from the trust fund to
616	569		policyholders and for association administrative expenses directly
617	570		related to funding the payment of insured losses in the event of an
618	571		occurrence or series of occurrences within a catastrophe area that
619	572		results in a disbursement under Subchapter B-1 or B-2.
620	573		(b) Effective September 1, 2027, Sections 2210.452(a), (c),
621	574		and (d), Insurance Code, are amended to read as follows:
622	575		(a) The commissioner shall adopt rules under which the
623	576		association makes payments to the catastrophe reserve trust fund.
624	577		Except as otherwise specifically provided by this section, the
625	578		trust fund may be used only for purposes directly related to funding
626	579		the payment of insured losses, including:
627	580		(1) funding the obligations of the trust fund under
628	581		Subchapter B-2 [B-1]; and
629	582		(2) purchasing reinsurance or using alternative risk
630	583		financing mechanisms under Section 2210.453.
631	584		(c) At the end of each calendar year or policy year, the
632	585		association shall use the net gain from operations of the
633	586		association, including all premium and other revenue of the
634	587		association in excess of incurred losses and[,] operating expenses,
635	588		[public security obligations, and public security administrative
636	589		expenses,] to make payments to the trust fund, procure reinsurance,
637	590		or use alternative risk financing mechanisms, or to make payments
638	591		to the trust fund and procure reinsurance or use alternative risk
639	592		financing mechanisms.
640	593		(d) The commissioner by rule shall establish the procedure
641	594		relating to the disbursement of money from the trust fund to
642	595		policyholders and for association administrative expenses directly
643	596		related to funding the payment of insured losses in the event of an
644	597		occurrence or series of occurrences within a catastrophe area that
645	598		results in a disbursement under Subchapter B-2 [B-1].
646	599		SECTION 2.07. (a) Sections 2210.453(b) and (c), Insurance
647	600		Code, are amended to read as follows:
648	601		(b) The association shall maintain total available loss
649	602		funding in an amount not less than the probable maximum loss for the
650	603		association for a catastrophe year with a probability of one in 100.
651	604		If necessary, the required funding level shall be achieved through
652	605		the purchase of reinsurance or the use of alternative financing
653	606		mechanisms, or both, to operate in addition to or in concert with
654	607		the trust fund, public securities, financial instruments,
655	608		financing arrangements, and assessments authorized by this
656	609		chapter.
657	610		(c) The attachment point for reinsurance purchased under
658	611		this section may not be less than the aggregate amount of all
659	612		funding available to the association under Subchapters
660	613		[Subchapter] B-1 and B-2.
661	614		(b) Effective September 1, 2027, Sections 2210.453(b) and
662	615		(c), Insurance Code, are amended to read as follows:
663	616		(b) The association shall maintain total available loss
664	617		funding in an amount not less than the probable maximum loss for the
665	618		association for a catastrophe year with a probability of one in 100.
666	619		If necessary, the required funding level shall be achieved through
667	620		the purchase of reinsurance or the use of alternative financing
668	621		mechanisms, or both, to operate in addition to or in concert with
669	622		the trust fund, [public securities,] financial instruments,
670	623		financing arrangements, and assessments authorized by this
671	624		chapter.
672	625		(c) The attachment point for reinsurance purchased under
673	626		this section may not be less than the aggregate amount of all
674	627		funding available to the association under Subchapter B-2 [B-1].
675	628		ARTICLE 3. TRANSITION AND SAVINGS PROVISIONS
676	629		SECTION 3.01. Notwithstanding the repeal by this Act of
677	630		Subchapters B-1 and M, Chapter 2210, Insurance Code, and other
678	631		changes in law made by this Act effective September 1, 2027:
679	632		(1) the payment of excess losses and operating
680	633		expenses of the Texas Windstorm Insurance Association incurred
681	634		before January 1, 2026, is governed by the law as it existed on the
682	635		effective date of this Act, and that law is continued in effect for
683	636		that purpose;
684	637		(2) the issuance of public securities to pay excess
685	638		losses and operating expenses of the Texas Windstorm Insurance
686	639		Association incurred before January 1, 2026, the use of the
687	640		proceeds of those securities, the repayment or refinancing of those
688	641		securities, and any other rights, obligations, or limitations with
689	642		respect to those securities and proceeds of those securities are
690	643		governed by the law as it existed on the effective date of this Act,
691	644		and that law is continued in effect for that purpose; and
692	645		(3) proceeds of any assessments made under Subchapter
693	646		B-1, Chapter 2210, Insurance Code, may not be included in reserves
694	647		available for a catastrophe year for purposes of Section 2210.082,
695	648		Insurance Code, as added by this Act, unless approved by the
696	649		commissioner of insurance.
697	650		ARTICLE 4. EFFECTIVE DATE
698	651		SECTION 4.01. Except as otherwise provided by this Act,
699	652		this Act takes effect September 1, 2025.