BILL ANALYSIS Senate Research Center S.B. 2530 By: Middleton et al. Business & Commerce 4/4/2025 As Filed AUTHOR'S / SPONSOR'S STATEMENT OF INTENT Over the last several sessions, reforms of the Texas Windstorm Insurance Association's (TWIA) operations to control rates and assert greater accountability over the association greatly improved the administration of the association. However, additional reforms are needed to ensure that the association fulfills its vital public function as the insurer of last resort on the Texas Gulf Coast. S.B. 2530 seeks to address this issue by implementing several reforms that will improve the administration of TWIA. The reforms included in S.B. 2530 are as follows: Exempts TWIA from insurance premium and maintenance taxes and fees. Prohibits the use of association funds to lobby the legislature. Moves TWIA's headquarters to a first tier or second tier coastal county. Instructs the TWIA board of directors to pay off debt early, if the association has the ability to do so and the commissioner of insurance approves. Ties the assessment layers of TWIA's funding stack to the growth in the probable maximum loss (PML) Note: TWIA is a residual market, meaning that when TWIA's policy count and exposure grows, it is because the assessed carriers are writing fewer policies along the coast. This ties the assessment layers to the PML to accurately reflect what is driving TWIA's increased exposure. Removes a burdensome 100-mile limitation on inland representatives of the TWIA board of directors. Clarifies that more than one independent agent may serve as a coastal representative on the board of directors. Requires that a meeting of the board of directors to establish the PML and set the annual rate take place in a first tier coastal county. Establishes that the only votes that count towards the establishment of the PML and setting of the annual rate filing are the votes cast in person. Prohibits TWIA from applying inflation adjusters on premiums, fees, or other costs without a vote of the board of directors. Moves the annual rate setting deadline to September 15, after legislation passed during the regular session goes into effect. Removes the requirement that factors outside of this state be included in the modeling for the adoption of rates. Requires the board of directors to select the lowest modeled PML and requires the commissioner of insurance to approve the PML. Lowers the statutorily required minimum funding level to a 1 in 50 probable maximum loss. Prohibits the inclusion of loss adjustment expense from the PML. As proposed, S.B. 2530 amends current law relating to the Texas Windstorm Insurance Association. RULEMAKING AUTHORITY This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 2210.014, Insurance Code, by adding Subsection (d) to provide that the Texas Windstorm Insurance Association (TWIA) is not subject to any insurance premium tax or insurance maintenance fee or tax. SECTION 2. Amends Subchapter A, Chapter 2210, Insurance Code, by adding Section 2210.016, as follows: Sec. 2210.016. LEGISLATIVE LOBBYING. (a) Prohibits TWIA from using any money under its control to attempt to influence the passage or defeat of a legislative measure. (b) Provides that a TWIA employee or member of the board of directors who violates Subsection (a) is subject to immediate termination and a fine of $10,000 to be deposited in the catastrophe reserve trust fund. (c) Provides that this section does not prohibit a TWIA employee or member of the board of directors from using money under TWIA's control to provide public information or to provide information responsive to a request for public information. SECTION 3. Amends Subchapter B, Chapter 2210, Insurance Code, by adding Section 2210.063, as follows: Sec. 2210.063. LOCATION OF ASSOCIATION HEADQUARTERS. Requires that the headquarters of TWIA be located in a first tier coastal county or a second tier coastal county. SECTION 4. Amends Section 2210.072(a), Government Code, to provide that public securities described by Section 2210.072 (Payment From Class 1 Public Securities; Financial Investments) are required to be paid within a period not to exceed 14 years, and required, rather than authorized, to be paid sooner if the board of directors identifies that TWIA has the ability, rather than if the board of directors elects to do so, and the commissioner of insurance (commissioner) approves. SECTION 5. Amends Section 2210.0725(a), Insurance Code, to require that losses in a catastrophe year not paid under Sections 2210.0715 (Payment From Reserves and Trust Fund) and 2210.072 (Payment From Class 1 Public Securities; Financial Instruments) be paid as provided by Section 2210.0725 (Payment From Class 1 Assessments) from Class 1 member assessments in an amount of at least, rather than not to exceed, $500 million, adjusted annually proportional to the growth in TWIA's probable maximum loss, for that catastrophe year. SECTION 6. Amends Section 2210.073(a), Insurance Code, to provide that public securities issued under Section 2210.073 (Payment From Class 2 Public Securities) are required to be paid within a period not to exceed 10 years and required, rather than authorized, to be paid sooner if the board of directors identifies that TWIA has the ability, rather than elects, to do so and the commissioner approves. SECTION 7. Amends Section 2210.074(a), Insurance Code, to require that losses in a catastrophe year not paid under Sections 2210.0715, 2210.072, 2210.0725, and 2210.073 be paid as provided by Section 2210.074 (Payment Through Class 2 Assessments) from Class 2 member assessments in an amount of at least, rather than not to exceed, $250 million, adjusted annually proportional to the growth in TWIA's probable maximum loss, for that catastrophe year. SECTION 8. Amends Section 2210.0741(a), Insurance Code, to provide that public securities issued under Section 2210.0741 (Payment Through Class 3 Public Securities) are required to be paid within a period not to exceed 10 years and required, rather than authorized, to be paid sooner if the board of directors identifies that TWIA has the ability, rather than elects, to do so and the commissioner approves. SECTION 9. Amends Section 2210.0742(a), Insurance Code, to require that losses in a catastrophe year not paid under Sections 2210.0715, 2210.072, 2210.0725, 2210.073, 2210.074, and 2210.0741 be paid as provided by Section 2210.0742 (Payment From Class 3 Assessments) from Class 3 member assessments in an amount of at least, rather than not to exceed, $250 million, adjusted annually proportional to the growth in TWIA's probable maximum loss, for that catastrophe year. SECTION 10. Amends Section 2210.102, Insurance Code, as follows: Sec. 2210.102. COMPOSITION. (a)-(c) Makes no changes to these subsections. (c-1) Requires at least one, rather than one of the members appointed under Subsection (c) (relating to requiring that three members of board of directors of TWIA reside in the first tier coastal counties) to be a property and casualty agent who is licensed under this code and is not a captive agent. (d) Requires three members to reside in an area of this state that is located outside a first tier coastal county, rather than more than 100 miles from the Texas coastline. (e)-(h) Makes no changes to these subsections. SECTION 11. Amends Section 2210.105, Insurance Code, by adding Subsections (h) and (i), as follows: (h) Requires that a meeting to establish TWIA's probable maximum loss and the annual rate setting meeting be held in-person at a location within a first tier coastal county. (i) Requires that a vote by a member of the board of directors at a meeting described by Subsection (h) only count towards the establishment of the probable maximum loss or the adoption of the annual rate filing if the vote is cast by a member of the board of directors in person at the meeting. SECTION 12. Amends Subchapter E, Chapter 2210, Insurance Code, by adding Section 2210.211, as follows: Sec. 2210.211. LIMITATIONS ON CERTAIN ADJUSTMENTS. Prohibits TWIA from adjusting premiums, fees, or any other costs to policyholders for inflation without a vote by the board of directors. SECTION 13. Amends Section 2210.352(a), Insurance Code, to require TWIA, not later than September 15, rather than August 15, of each year, to file with TWIA a proposed manual rate for all types and classes of risks written by TWIA. SECTION 14. Amends Section 2210.355(b), Insurance Code, as follows: (b) Requires that the following, in adopting rates under Chapter 2210 (Texas Windstorm Insurance Association), be considered: (1) the past and prospective loss experience within, rather than within and outside, this state of hazards for which insurance is made available through the plan of operation, if any; (2)-(4) makes no changes to these subdivisions; and (5) all other relevant factors, within, rather than within and outside, this state. SECTION 15. Amends Section 2210.453(b), Insurance Code, to require TWIA to maintain total available loss funding in an amount not less than the probable maximum loss for TWIA for a catastrophe year with a probability of one in 50, rather than one in 100. SECTION 16. Amends Subchapter J, Chapter 2210, Insurance Code, by adding Section 2210.4531, as follows: Sec. 2210.4531. DETERMINATION OF PROBABLE MAXIMUM LOSS. (a) Requires TWIA to file with the Texas Department of Insurance (TDI) a proposed probable maximum loss, subject to Section 2210.453. (b) Provides that, in determining the probable maximum loss, TWIA is: (1) required to, to the extent possible, contract with any disinterested third parties necessary to execute any catastrophe models that were executed in the preceding storm season; (2) required to, if TWIA is unable to contract for the execution of a catastrophe model described by Subdivision (2), contract with any disinterested third party necessary to execute a catastrophe model that is substantially similar to the model for which TWIA is unable to contract under Subdivision (2); (3) authorized to contract with any disinterested third parties to execute catastrophe models in addition to the models required under Subdivisions (1) and (2); (4) required to provide to a disinterested third party executing a catastrophe model any information necessary to comply with this subsection; (5) prohibited from using a combination of catastrophe models to determine the probable maximum loss; and (6) authorized to use only the catastrophe model that produces the lowest probable maximum loss. (c) Requires TWIA to make any information produced in compliance with Subsection (b) publicly available on TWIA's Internet website. (d) Provides that TWIA is authorized only to use a probable maximum loss that is approved by the commissioner. Authorizes the commissioner to reject a probable maximum loss filed with TDI by TWIA and set a probable maximum loss at any amount determined by the commissioner. (e) Requires that the amount of loss adjustment expense, as adopted by the board of directors for a catastrophe year and used for TWIA's rate indication for purposes of filing a rate under this chapter, be considered above the probable maximum loss. SECTION 17. Provides that Section 2210.063, Insurance Code, as added by this Act, applies to TWIA beginning on January 1, 2027. SECTION 18. Makes application of Sections 2210.0725(a), 2210.074(a), and 2210.0742(a), as amended by this Act, prospective to January 1, 2026. Requires that the amounts of assessments on January 1, 2026, be equivalent to the amount of assessments on that date after adjusted to the growth in TWIA's probable maximum loss from January 1, 2021, to January 1, 2026. SECTION 19. Effective date: upon passage or September 1, 2025.
BILL ANALYSIS
Senate Research Center S.B. 2530
By: Middleton et al.
Business & Commerce
4/4/2025
As Filed
Senate Research Center
S.B. 2530
By: Middleton et al.
Business & Commerce
4/4/2025
As Filed
AUTHOR'S / SPONSOR'S STATEMENT OF INTENT
Over the last several sessions, reforms of the Texas Windstorm Insurance Association's (TWIA) operations to control rates and assert greater accountability over the association greatly improved the administration of the association. However, additional reforms are needed to ensure that the association fulfills its vital public function as the insurer of last resort on the Texas Gulf Coast. S.B. 2530 seeks to address this issue by implementing several reforms that will improve the administration of TWIA.
The reforms included in S.B. 2530 are as follows:
Prohibits the inclusion of loss adjustment expense from the PML.
As proposed, S.B. 2530 amends current law relating to the Texas Windstorm Insurance Association.
RULEMAKING AUTHORITY
This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Section 2210.014, Insurance Code, by adding Subsection (d) to provide that the Texas Windstorm Insurance Association (TWIA) is not subject to any insurance premium tax or insurance maintenance fee or tax.
SECTION 2. Amends Subchapter A, Chapter 2210, Insurance Code, by adding Section 2210.016, as follows:
Sec. 2210.016. LEGISLATIVE LOBBYING. (a) Prohibits TWIA from using any money under its control to attempt to influence the passage or defeat of a legislative measure.
(b) Provides that a TWIA employee or member of the board of directors who violates Subsection (a) is subject to immediate termination and a fine of $10,000 to be deposited in the catastrophe reserve trust fund.
(c) Provides that this section does not prohibit a TWIA employee or member of the board of directors from using money under TWIA's control to provide public information or to provide information responsive to a request for public information.
SECTION 3. Amends Subchapter B, Chapter 2210, Insurance Code, by adding Section 2210.063, as follows:
Sec. 2210.063. LOCATION OF ASSOCIATION HEADQUARTERS. Requires that the headquarters of TWIA be located in a first tier coastal county or a second tier coastal county.
SECTION 4. Amends Section 2210.072(a), Government Code, to provide that public securities described by Section 2210.072 (Payment From Class 1 Public Securities; Financial Investments) are required to be paid within a period not to exceed 14 years, and required, rather than authorized, to be paid sooner if the board of directors identifies that TWIA has the ability, rather than if the board of directors elects to do so, and the commissioner of insurance (commissioner) approves.
SECTION 5. Amends Section 2210.0725(a), Insurance Code, to require that losses in a catastrophe year not paid under Sections 2210.0715 (Payment From Reserves and Trust Fund) and 2210.072 (Payment From Class 1 Public Securities; Financial Instruments) be paid as provided by Section 2210.0725 (Payment From Class 1 Assessments) from Class 1 member assessments in an amount of at least, rather than not to exceed, $500 million, adjusted annually proportional to the growth in TWIA's probable maximum loss, for that catastrophe year.
SECTION 6. Amends Section 2210.073(a), Insurance Code, to provide that public securities issued under Section 2210.073 (Payment From Class 2 Public Securities) are required to be paid within a period not to exceed 10 years and required, rather than authorized, to be paid sooner if the board of directors identifies that TWIA has the ability, rather than elects, to do so and the commissioner approves.
SECTION 7. Amends Section 2210.074(a), Insurance Code, to require that losses in a catastrophe year not paid under Sections 2210.0715, 2210.072, 2210.0725, and 2210.073 be paid as provided by Section 2210.074 (Payment Through Class 2 Assessments) from Class 2 member assessments in an amount of at least, rather than not to exceed, $250 million, adjusted annually proportional to the growth in TWIA's probable maximum loss, for that catastrophe year.
SECTION 8. Amends Section 2210.0741(a), Insurance Code, to provide that public securities issued under Section 2210.0741 (Payment Through Class 3 Public Securities) are required to be paid within a period not to exceed 10 years and required, rather than authorized, to be paid sooner if the board of directors identifies that TWIA has the ability, rather than elects, to do so and the commissioner approves.
SECTION 9. Amends Section 2210.0742(a), Insurance Code, to require that losses in a catastrophe year not paid under Sections 2210.0715, 2210.072, 2210.0725, 2210.073, 2210.074, and 2210.0741 be paid as provided by Section 2210.0742 (Payment From Class 3 Assessments) from Class 3 member assessments in an amount of at least, rather than not to exceed, $250 million, adjusted annually proportional to the growth in TWIA's probable maximum loss, for that catastrophe year.
SECTION 10. Amends Section 2210.102, Insurance Code, as follows:
Sec. 2210.102. COMPOSITION. (a)-(c) Makes no changes to these subsections.
(c-1) Requires at least one, rather than one of the members appointed under Subsection (c) (relating to requiring that three members of board of directors of TWIA reside in the first tier coastal counties) to be a property and casualty agent who is licensed under this code and is not a captive agent.
(d) Requires three members to reside in an area of this state that is located outside a first tier coastal county, rather than more than 100 miles from the Texas coastline.
(e)-(h) Makes no changes to these subsections.
SECTION 11. Amends Section 2210.105, Insurance Code, by adding Subsections (h) and (i), as follows:
(h) Requires that a meeting to establish TWIA's probable maximum loss and the annual rate setting meeting be held in-person at a location within a first tier coastal county.
(i) Requires that a vote by a member of the board of directors at a meeting described by Subsection (h) only count towards the establishment of the probable maximum loss or the adoption of the annual rate filing if the vote is cast by a member of the board of directors in person at the meeting.
SECTION 12. Amends Subchapter E, Chapter 2210, Insurance Code, by adding Section 2210.211, as follows:
Sec. 2210.211. LIMITATIONS ON CERTAIN ADJUSTMENTS. Prohibits TWIA from adjusting premiums, fees, or any other costs to policyholders for inflation without a vote by the board of directors.
SECTION 13. Amends Section 2210.352(a), Insurance Code, to require TWIA, not later than September 15, rather than August 15, of each year, to file with TWIA a proposed manual rate for all types and classes of risks written by TWIA.
SECTION 14. Amends Section 2210.355(b), Insurance Code, as follows:
(b) Requires that the following, in adopting rates under Chapter 2210 (Texas Windstorm Insurance Association), be considered:
(1) the past and prospective loss experience within, rather than within and outside, this state of hazards for which insurance is made available through the plan of operation, if any;
(2)-(4) makes no changes to these subdivisions; and
(5) all other relevant factors, within, rather than within and outside, this state.
SECTION 15. Amends Section 2210.453(b), Insurance Code, to require TWIA to maintain total available loss funding in an amount not less than the probable maximum loss for TWIA for a catastrophe year with a probability of one in 50, rather than one in 100.
SECTION 16. Amends Subchapter J, Chapter 2210, Insurance Code, by adding Section 2210.4531, as follows:
Sec. 2210.4531. DETERMINATION OF PROBABLE MAXIMUM LOSS. (a) Requires TWIA to file with the Texas Department of Insurance (TDI) a proposed probable maximum loss, subject to Section 2210.453.
(b) Provides that, in determining the probable maximum loss, TWIA is:
(1) required to, to the extent possible, contract with any disinterested third parties necessary to execute any catastrophe models that were executed in the preceding storm season;
(2) required to, if TWIA is unable to contract for the execution of a catastrophe model described by Subdivision (2), contract with any disinterested third party necessary to execute a catastrophe model that is substantially similar to the model for which TWIA is unable to contract under Subdivision (2);
(3) authorized to contract with any disinterested third parties to execute catastrophe models in addition to the models required under Subdivisions (1) and (2);
(4) required to provide to a disinterested third party executing a catastrophe model any information necessary to comply with this subsection;
(5) prohibited from using a combination of catastrophe models to determine the probable maximum loss; and
(6) authorized to use only the catastrophe model that produces the lowest probable maximum loss.
(c) Requires TWIA to make any information produced in compliance with Subsection (b) publicly available on TWIA's Internet website.
(d) Provides that TWIA is authorized only to use a probable maximum loss that is approved by the commissioner. Authorizes the commissioner to reject a probable maximum loss filed with TDI by TWIA and set a probable maximum loss at any amount determined by the commissioner.
(e) Requires that the amount of loss adjustment expense, as adopted by the board of directors for a catastrophe year and used for TWIA's rate indication for purposes of filing a rate under this chapter, be considered above the probable maximum loss.
SECTION 17. Provides that Section 2210.063, Insurance Code, as added by this Act, applies to TWIA beginning on January 1, 2027.
SECTION 18. Makes application of Sections 2210.0725(a), 2210.074(a), and 2210.0742(a), as amended by this Act, prospective to January 1, 2026. Requires that the amounts of assessments on January 1, 2026, be equivalent to the amount of assessments on that date after adjusted to the growth in TWIA's probable maximum loss from January 1, 2021, to January 1, 2026.
SECTION 19. Effective date: upon passage or September 1, 2025.