Bill Text: TX HB1588 | 2023-2024 | 88th Legislature | Introduced
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Relating to funding of excess losses and operating expenses of the Texas Windstorm Insurance Association; authorizing an assessment; authorizing a surcharge.
Spectrum: Bipartisan Bill
Status: (Engrossed - Dead) 2023-05-25 - Senate Amendments Analysis distributed [HB1588 Detail]
Download: Texas-2023-HB1588-Introduced.html
Bill Title: Relating to funding of excess losses and operating expenses of the Texas Windstorm Insurance Association; authorizing an assessment; authorizing a surcharge.
Spectrum: Bipartisan Bill
Status: (Engrossed - Dead) 2023-05-25 - Senate Amendments Analysis distributed [HB1588 Detail]
Download: Texas-2023-HB1588-Introduced.html
88R4165 JES-F | ||
By: Oliverson | H.B. No. 1588 |
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relating to funding of excess losses and operating expenses of the | ||
Texas Windstorm Insurance Association; authorizing an assessment, | ||
a surcharge, and an infrastructure grant. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
ARTICLE 1. FUNDING OF INSURED LOSSES AND OPERATING EXPENSES OF | ||
TEXAS WINDSTORM INSURANCE ASSOCIATION | ||
SECTION 1.01. (a) In this section, "association" means the | ||
Texas Windstorm Insurance Association. | ||
(b) The legislature finds that the use of public securities | ||
is not an efficient or viable long-term method to fund losses of the | ||
association in order for the association to continue to provide | ||
windstorm and hail insurance after a catastrophic event. Subchapter | ||
B-2, Chapter 2210, Insurance Code, as added by this Act, is intended | ||
to replace Subchapter B-1, Insurance Code, to provide for funding | ||
of excess losses and operating expenses of the association incurred | ||
after December 31, 2023. | ||
(c) The legislature finds that: | ||
(1) previous experience has shown that the expense of | ||
issuing public securities is significant and can impose | ||
significant long-term expense obligations on coastal property and | ||
casualty risks that may be avoided if the legislature provides for | ||
an infrastructure grant to the association as a more efficient way | ||
to provide either pre-event or post-event funding for the | ||
association; and | ||
(2) a grant to the association of not more than $1 | ||
billion would: | ||
(A) replace the funding levels currently | ||
provided by issuing public securities; | ||
(B) be more consistent with sound insurance | ||
solvency standards than the issuance of public securities; and | ||
(C) provide a more viable method for the | ||
association to have catastrophe reserve funds for a catastrophic | ||
event than the issuance of public securities. | ||
(d) The legislature finds that authorizing contingent | ||
surcharges is a more viable method to raise money to replenish the | ||
catastrophe reserve trust fund after a hurricane and to ensure that | ||
the association can continue to provide windstorm and hail | ||
insurance in the coastal areas of this state after a catastrophic | ||
event to maintain the association's viability for the benefit of | ||
the public and in furtherance of a public purpose. | ||
SECTION 1.02. The heading to Subchapter B-1, Chapter 2210, | ||
Insurance Code, is amended to read as follows: | ||
SUBCHAPTER B-1. PAYMENT OF LOSSES INCURRED BEFORE JANUARY 1, 2024 | ||
SECTION 1.03. Subchapter B-1, Chapter 2210, Insurance Code, | ||
is amended by adding Section 2210.070 to read as follows: | ||
Sec. 2210.070. APPLICABILITY OF SUBCHAPTER. (a) This | ||
subchapter applies only to the payment of losses and operating | ||
expenses of the association for a catastrophe year that occurs | ||
before January 1, 2024, and results in excess losses and operating | ||
expenses incurred by the association before January 1, 2024. | ||
(b) Payment of excess losses and operating expenses of the | ||
association incurred after December 31, 2023, shall be paid as | ||
provided by Subchapter B-2. | ||
SECTION 1.04. Section 2210.071(a), Insurance Code, is | ||
amended to read as follows: | ||
(a) If, in a catastrophe year before January 1, 2024, an | ||
occurrence or series of occurrences in a catastrophe area results | ||
in insured losses and operating expenses of the association in | ||
excess of premium and other revenue of the association, the excess | ||
losses and operating expenses shall be paid as provided by this | ||
subchapter. | ||
SECTION 1.05. Section 2210.0715(b), Insurance Code, is | ||
amended to read as follows: | ||
(b) Proceeds of public securities issued or assessments | ||
made before January 1, 2024, or as a result of any occurrence or | ||
series of occurrences in a catastrophe year that occurs before | ||
January 1, 2024, and results in insured losses before that date may | ||
not be included in reserves available for a subsequent catastrophe | ||
year for purposes of this section or Section 2210.082 unless | ||
approved by the commissioner. | ||
SECTION 1.06. The heading to Section 2210.075, Insurance | ||
Code, is amended to read as follows: | ||
Sec. 2210.075. REINSURANCE BY MEMBERS. | ||
SECTION 1.07. Chapter 2210, Insurance Code, is amended by | ||
adding Subchapter B-2 to read as follows: | ||
SUBCHAPTER B-2. PAYMENT OF EXCESS LOSSES AND OPERATING EXPENSES | ||
Sec. 2210.080. APPLICABILITY OF SUBCHAPTER. (a) This | ||
subchapter applies only to payment of losses and operating expenses | ||
of the association for a catastrophe year that occurs after | ||
December 31, 2023, and results in excess losses and operating | ||
expenses incurred by the association after December 31, 2023. | ||
(b) This section expires September 1, 2025. | ||
Sec. 2210.081. PAYMENT OF EXCESS LOSSES. (a) If, in a | ||
catastrophe year, an occurrence or series of occurrences in a | ||
catastrophe area results in insured losses and operating expenses | ||
of the association in excess of premium and other revenue of the | ||
association, the excess losses and operating expenses shall be paid | ||
as provided by this subchapter. | ||
(b) The association may not pay insured losses and operating | ||
expenses resulting from an occurrence or series of occurrences in a | ||
catastrophe year with premium and other revenue earned in a | ||
subsequent year. | ||
Sec. 2210.082. PAYMENT FROM RESERVES AND TRUST FUND. The | ||
association shall pay insured losses and operating expenses | ||
resulting from an occurrence or series of occurrences in a | ||
catastrophe year in excess of premium and other revenue of the | ||
association for that catastrophe year from reserves of the | ||
association available before or accrued during that catastrophe | ||
year and amounts in the catastrophe reserve trust fund available | ||
before or accrued during that catastrophe year. | ||
Sec. 2210.083. PAYMENT FROM MEMBER ASSESSMENTS. (a) | ||
Insured losses and operating expenses for a catastrophe year not | ||
paid under Section 2210.082 shall be paid as provided by this | ||
section from member assessments not to exceed $1 billion for that | ||
catastrophe year. | ||
(b) The board of directors shall notify each association | ||
member of the amount of the member's assessment under this section. | ||
The proportion of the insured losses and operating expenses | ||
allocable to each insurer under this section shall be determined in | ||
the manner used to determine each insurer's participation in the | ||
association for the year under Section 2210.052. | ||
(c) An association member may not recoup an assessment paid | ||
under this section through a premium surcharge or tax credit. | ||
Sec. 2210.084. REINSURANCE BY MEMBERS FOR MEMBER | ||
ASSESSMENTS. (a) Before any occurrence or series of occurrences, | ||
an association member may purchase reinsurance to cover an | ||
assessment for which the member would otherwise be liable under | ||
this subchapter. | ||
(b) An association member must notify the board of | ||
directors, in the manner prescribed by the association, whether the | ||
member will be purchasing reinsurance. If the member does not | ||
purchase reinsurance under this section, the member remains liable | ||
for any assessment imposed under this subchapter. | ||
SECTION 1.08. Section 2210.452(b), Insurance Code, is | ||
amended to read as follows: | ||
(b) All money, including investment income, deposited in | ||
the trust fund constitutes state funds until disbursed as provided | ||
by this chapter and commissioner rules. The comptroller shall hold | ||
the money outside the state treasury on behalf of, and with legal | ||
title in, the department on behalf of the association. The | ||
department shall keep and maintain the trust fund in accordance | ||
with this chapter and commissioner rules. The comptroller, as | ||
custodian of the trust fund, shall administer the trust fund | ||
strictly and solely as provided by this chapter and commissioner | ||
rules. The association may include the amounts held in the | ||
catastrophe reserve trust fund as an admitted asset in the | ||
financial statements of the association. | ||
SECTION 1.09. Section 2210.4521(a), Insurance Code, is | ||
amended to read as follows: | ||
(a) The comptroller shall invest in accordance with the | ||
investment standard described by Section 404.024(j), Government | ||
Code, the portion of the trust fund balance that exceeds the amount | ||
of the sufficient balance determined under Subsection (b). The | ||
comptroller's investment of that portion of the balance is not | ||
subject to any other limitation or other requirement provided by | ||
Section 404.024, Government Code. The Texas Treasury Safekeeping | ||
Trust Company and board of directors may recommend investments to | ||
protect the trust fund and create investment income. | ||
SECTION 1.10. Sections 2210.453(d) and (e), Insurance Code, | ||
are amended to read as follows: | ||
(d) The association shall obtain reinsurance at any level | ||
including excess of loss, quota share, and other forms of | ||
reinsurance to protect the solvency of the association. In | ||
determining the amount of required reinsurance, the association | ||
shall consider maintaining or protecting a minimum balance of $250 | ||
million in the catastrophe reserve trust fund. The commissioner | ||
may consult with the board of directors regarding methods to | ||
protect the solvency and continued viability of the association, | ||
including by protecting the minimum balance, acquiring | ||
reinsurance, or by other means [ |
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(e) The commissioner may adopt a method or approve the | ||
association's method of determining the probability of one in 100 | ||
for association risks. The commissioner shall provide any adopted | ||
or approved method to the association on or before February 1 of | ||
each year [ |
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SECTION 1.11. Section 2210.601, Insurance Code, is amended | ||
to read as follows: | ||
Sec. 2210.601. FINDINGS [ |
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that for losses incurred before January 1, 2024, the authorization | ||
of [ |
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provide a method to raise funds to provide windstorm and hail | ||
insurance through the association in certain designated portions of | ||
the state is for the benefit of the public and in furtherance of a | ||
public purpose. | ||
SECTION 1.12. Subchapter M, Chapter 2210, Insurance Code, | ||
is amended by adding Section 2210.6015 to read as follows: | ||
Sec. 2210.6015. APPLICABILITY OF SUBCHAPTER. To provide | ||
for a reasonable transition, the association may issue public | ||
securities under this subchapter if the association needs to | ||
provide funds for excess losses and operating expenses incurred by | ||
the association before January 1, 2024, for a catastrophe year | ||
occurring before January 1, 2024. After December 31, 2023, the | ||
association may not issue public securities under this subchapter | ||
except to fund excess losses and operating expenses incurred before | ||
January 1, 2024. | ||
SECTION 1.13. Chapter 2210, Insurance Code, is amended by | ||
adding Subchapters M-1 and M-2 to read as follows: | ||
SUBCHAPTER M-1. CATASTROPHE INFRASTRUCTURE GRANT | ||
Sec. 2210.631. CATASTROPHE INFRASTRUCTURE GRANT. (a) The | ||
legislature has determined that providing an infrastructure grant | ||
to the association to capitalize the catastrophe reserve trust fund | ||
in an amount not more than $1 billion would provide the necessary | ||
infrastructure for insuring catastrophic risks. | ||
(b) The governor, in consultation with the commissioner, | ||
lieutenant governor, and speaker of the house of representatives, | ||
may authorize an infrastructure grant to the association consistent | ||
with this subchapter under any act appropriating or authorizing the | ||
grant of money for infrastructure improvements. | ||
Sec. 2210.632. CATASTROPHE INFRASTRUCTURE GRANT PROCEEDS. | ||
The proceeds of a catastrophe infrastructure grant authorized under | ||
this subchapter shall be deposited in the catastrophe reserve trust | ||
fund. | ||
SUBCHAPTER M-2. CONTINGENT HURRICANE SURCHARGE | ||
Sec. 2210.641. DEFINITION. In this subchapter, | ||
"catastrophic event" means an occurrence or a series of occurrences | ||
that: | ||
(1) occurs in a catastrophe area during a calendar | ||
year; and | ||
(2) results in insured losses and operating expenses | ||
of the association in excess of premium and other revenue of the | ||
association. | ||
Sec. 2210.642. APPLICABILITY OF SUBCHAPTER. (a) | ||
Notwithstanding Section 2210.006, this subchapter applies to an | ||
insurer that is: | ||
(1) an insurer authorized to engage in the business of | ||
insurance in this state that is required to be a member of the | ||
association, including a farm mutual insurance company that is a | ||
fronting insurer as defined by Section 221.001(c); | ||
(2) a farm mutual insurance company that is not a | ||
fronting insurer as defined by Section 221.001(c) only for purposes | ||
of the collection of surcharges authorized by this subchapter; | ||
(3) an unaffiliated eligible surplus lines insurer | ||
writing the lines of business subject to a premium surcharge under | ||
this subchapter; | ||
(4) the association; and | ||
(5) the FAIR Plan Association. | ||
(b) A premium surcharge under this subchapter applies to: | ||
(1) a policy written under the following lines of | ||
insurance: | ||
(A) fire and allied lines; | ||
(B) farm and ranch owners; and | ||
(C) residential property insurance; and | ||
(2) the property insurance portion of a commercial | ||
multiple peril insurance policy. | ||
Sec. 2210.6425. CONSTRUCTION OF SUBCHAPTER. (a) This | ||
subchapter may not be construed to require an insurer to be an | ||
association member if the insurer is not otherwise required to be a | ||
member under Section 2210.052. | ||
(b) A farm mutual insurance company that is not a fronting | ||
insurer as defined by Section 221.001(c) is not a member of the | ||
association as a result of the company's collection of surcharges | ||
authorized by this subchapter or for any other reason. | ||
Sec. 2210.643. ANNUAL FINANCIAL REPORT BY COMMISSIONER. | ||
The commissioner shall determine the amount available in the | ||
catastrophe reserve trust fund as of December 31 of each year and | ||
provide a written report to the governor, lieutenant governor, and | ||
speaker of the house of representatives that includes: | ||
(1) the amount available in the catastrophe reserve | ||
trust fund; and | ||
(2) information regarding the current financial | ||
condition of the association. | ||
Sec. 2210.6435. CONTINGENT HURRICANE SURCHARGES. (a) The | ||
commissioner, in consultation with the board of directors, may | ||
order a contingent hurricane surcharge as provided by this | ||
subchapter only if the commissioner determines after a catastrophic | ||
event that: | ||
(1) the association has depleted its reserves, other | ||
funds, and the catastrophe reserve trust fund; and | ||
(2) the association has no other source of funding | ||
reasonably available to provide adequate funding for the next | ||
catastrophe year. | ||
(b) The commissioner, in consultation with the board of | ||
directors, shall set the contingent hurricane surcharge as a | ||
percentage of premium to be collected by each insurer to which this | ||
subchapter applies. | ||
(c) The total amount authorized to be collected under this | ||
section for any contingent hurricane surcharge may not exceed the | ||
lesser of: | ||
(1) the amount needed to recapitalize the catastrophe | ||
reserve trust fund to $1 billion; or | ||
(2) $1 billion. | ||
(d) The contingent hurricane surcharge percentage must be | ||
set in an amount sufficient to replenish the catastrophe reserve | ||
trust fund to an aggregate amount of not more than $1 billion. The | ||
commissioner may set the surcharge as a percentage of premium to | ||
collect the needed aggregate amount over a period of time not to | ||
exceed three years. | ||
(e) The commissioner shall determine the period of time and | ||
percentage to be applied subject to Subsection (d). | ||
(f) A contingent hurricane surcharge authorized under this | ||
section shall be assessed by insurers on all policyholders of | ||
policies that are subject to this subchapter. | ||
(g) A contingent hurricane surcharge under this subchapter | ||
is a separate charge in addition to the premiums collected and is | ||
not subject to premium tax or commissions. | ||
(h) Failure by a policyholder to pay a contingent hurricane | ||
surcharge constitutes failure to pay premium for purposes of policy | ||
cancellation. | ||
(i) A contingent hurricane surcharge is not refundable if | ||
the policy is canceled or terminated. | ||
Sec. 2210.644. CONTINGENT HURRICANE SURCHARGE PROCEEDS. | ||
The proceeds of a contingent hurricane surcharge authorized under | ||
this subchapter shall be deposited into the catastrophe reserve | ||
trust fund. | ||
Sec. 2210.6445. DISCLOSURE OF SURCHARGE. Each policy that | ||
is assessed a surcharge under this subchapter shall contain the | ||
following prominent disclosure in the documents attached to the | ||
policy: | ||
"A HURRICANE SURCHARGE HAS BEEN INCLUDED ON YOUR POLICY. | ||
THIS SURCHARGE WILL BE USED TO PROVIDE FUNDS FOR THE TEXAS WINDSTORM | ||
INSURANCE ASSOCIATION TO PAY FOR LOSSES AFTER A CATASTROPHIC EVENT, | ||
INCLUDING A HURRICANE. THE SURCHARGE IS NOT REFUNDABLE IF YOU | ||
CANCEL OR TERMINATE THIS POLICY." | ||
Sec. 2210.645. EXEMPTION FROM TAXATION. A surcharge | ||
collected under this subchapter is exempt from taxation by this | ||
state or a municipality or other political subdivision of this | ||
state. | ||
Sec. 2210.6455. LIMITATION OF PERSONAL LIABILITY. The | ||
association members, the insurers required to collect a surcharge | ||
under this subchapter, members of the board of directors, | ||
association employees, the commissioner, and department employees | ||
are not personally liable as a result of exercising the rights and | ||
responsibilities granted under this subchapter. | ||
Sec. 2210.646. EXEMPTION FROM SURCHARGE. An insurer may | ||
not collect a surcharge authorized under this subchapter on any | ||
policy issued to this state, an agency of this state, or a political | ||
subdivision of this state. | ||
SECTION 1.14. Effective September 1, 2025, the following | ||
provisions of the Insurance Code are repealed: | ||
(1) Subchapter B-1, Chapter 2210; and | ||
(2) Subchapter M, Chapter 2210. | ||
SECTION 1.15. As soon as practicable after the effective | ||
date of this Act and not later than December 1, 2023, the | ||
commissioner of insurance shall adopt rules necessary to implement | ||
Subchapters B-2 and M-2, Insurance Code, as added by this Act. | ||
ARTICLE 2. CONFORMING AMENDMENTS | ||
SECTION 2.01. Effective September 1, 2025, Section | ||
2210.0081, Insurance Code, is amended to read as follows: | ||
Sec. 2210.0081. CERTAIN ACTIONS BROUGHT AGAINST | ||
ASSOCIATION BY COMMISSIONER. In an action brought by the | ||
commissioner against the association under Chapter 441,[ |
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requirements of supervision or for the conservator to complete the | ||
conservator's duties, as applicable, is limited to three years from | ||
the date the commissioner commences the action against the | ||
association[ |
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SECTION 2.02. (a) Section 2210.056(b), Insurance Code, is | ||
amended to read as follows: | ||
(b) The association's assets may not be used for or diverted | ||
to any purpose other than to: | ||
(1) satisfy, in whole or in part, the liability of the | ||
association on claims made on policies written by the association; | ||
(2) make investments authorized under applicable law; | ||
(3) pay reasonable and necessary administrative | ||
expenses incurred in connection with the operation of the | ||
association and the processing of claims against the association; | ||
(4) satisfy, in whole or in part, the obligations of | ||
the association incurred in connection with Subchapters B-1, B-2, | ||
J, [ |
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financial instruments; or | ||
(5) make remittance under the laws of this state to be | ||
used by this state to: | ||
(A) pay claims made on policies written by the | ||
association; | ||
(B) purchase reinsurance covering losses under | ||
those policies; or | ||
(C) prepare for or mitigate the effects of | ||
catastrophic natural events. | ||
(b) Effective September 1, 2025, Sections 2210.056(b) and | ||
(c), Insurance Code, are amended to read as follows: | ||
(b) The association's assets may not be used for or diverted | ||
to any purpose other than to: | ||
(1) satisfy, in whole or in part, the liability of the | ||
association on claims made on policies written by the association; | ||
(2) make investments authorized under applicable law; | ||
(3) pay reasonable and necessary administrative | ||
expenses incurred in connection with the operation of the | ||
association and the processing of claims against the association; | ||
(4) satisfy, in whole or in part, the obligations of | ||
the association incurred in connection with Subchapters B-2 [ |
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J, and M-2 [ |
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financial instruments; or | ||
(5) make remittance under the laws of this state to be | ||
used by this state to: | ||
(A) pay claims made on policies written by the | ||
association; | ||
(B) purchase reinsurance covering losses under | ||
those policies; or | ||
(C) prepare for or mitigate the effects of | ||
catastrophic natural events. | ||
(c) On dissolution of the association, all assets of the | ||
association[ |
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SECTION 2.03. (a) Section 2210.1052, Insurance Code, is | ||
amended to read as follows: | ||
Sec. 2210.1052. EMERGENCY MEETING. If the ultimate loss | ||
estimate for an occurrence or series of occurrences made by the | ||
chief financial officer or chief actuary of the association | ||
indicates member insurers may be subject to an assessment under | ||
Subchapter B-1 or B-2, the board of directors shall call an | ||
emergency meeting to notify the member insurers about the | ||
assessment. | ||
(b) Effective September 1, 2025, Section 2210.1052, | ||
Insurance Code, is amended to read as follows: | ||
Sec. 2210.1052. EMERGENCY MEETING. If the ultimate loss | ||
estimate for an occurrence or series of occurrences made by the | ||
chief financial officer or chief actuary of the association | ||
indicates member insurers may be subject to an assessment under | ||
Subchapter B-2 [ |
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emergency meeting to notify the member insurers about the | ||
assessment. | ||
SECTION 2.04. Effective September 1, 2025, Section | ||
2210.355(b), Insurance Code, is amended to read as follows: | ||
(b) In adopting rates under this chapter, the following must | ||
be considered: | ||
(1) the past and prospective loss experience within | ||
and outside this state of hazards for which insurance is made | ||
available through the plan of operation, if any; | ||
(2) expenses of operation, including acquisition | ||
costs; | ||
(3) a reasonable margin for profit and contingencies; | ||
and | ||
(4) [ |
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this state. | ||
SECTION 2.05. (a) Section 2210.363(a), Insurance Code, is | ||
amended to read as follows: | ||
(a) The association may offer a person insured under this | ||
chapter an actuarially justified premium discount on a policy | ||
issued by the association, or an actuarially justified credit | ||
against a surcharge assessed against the person, other than a | ||
surcharge assessed under Subchapter M or M-2, if: | ||
(1) the construction, alteration, remodeling, | ||
enlargement, or repair of, or an addition to, insurable property | ||
exceeds applicable building code standards set forth in the plan of | ||
operation; or | ||
(2) the person elects to purchase a binding | ||
arbitration endorsement under Section 2210.554. | ||
(b) Effective September 1, 2025, Section 2210.363(a), | ||
Insurance Code, is amended to read as follows: | ||
(a) The association may offer a person insured under this | ||
chapter an actuarially justified premium discount on a policy | ||
issued by the association, or an actuarially justified credit | ||
against a surcharge assessed against the person, other than a | ||
surcharge assessed under Subchapter M-2 [ |
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(1) the construction, alteration, remodeling, | ||
enlargement, or repair of, or an addition to, insurable property | ||
exceeds applicable building code standards set forth in the plan of | ||
operation; or | ||
(2) the person elects to purchase a binding | ||
arbitration endorsement under Section 2210.554. | ||
SECTION 2.06. (a) Sections 2210.452(a) and (d), Insurance | ||
Code, are amended to read as follows: | ||
(a) The commissioner shall adopt rules under which the | ||
association makes payments to the catastrophe reserve trust fund. | ||
Except as otherwise specifically provided by this section, the | ||
trust fund may be used only for purposes directly related to funding | ||
the payment of insured losses, including: | ||
(1) funding the obligations of the trust fund under | ||
Subchapters [ |
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(2) purchasing reinsurance or using alternative risk | ||
financing mechanisms under Section 2210.453. | ||
(d) The commissioner by rule shall establish the procedure | ||
relating to the disbursement of money from the trust fund to | ||
policyholders and for association administrative expenses directly | ||
related to funding the payment of insured losses in the event of an | ||
occurrence or series of occurrences within a catastrophe area that | ||
results in a disbursement under Subchapter B-1 or B-2. | ||
(b) Effective September 1, 2025, Sections 2210.452(a), (c), | ||
and (d), Insurance Code, are amended to read as follows: | ||
(a) The commissioner shall adopt rules under which the | ||
association makes payments to the catastrophe reserve trust fund. | ||
Except as otherwise specifically provided by this section, the | ||
trust fund may be used only for purposes directly related to funding | ||
the payment of insured losses, including: | ||
(1) funding the obligations of the trust fund under | ||
Subchapter B-2 [ |
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(2) purchasing reinsurance or using alternative risk | ||
financing mechanisms under Section 2210.453. | ||
(c) At the end of each calendar year or policy year, the | ||
association shall use the net gain from operations of the | ||
association, including all premium and other revenue of the | ||
association in excess of incurred losses and[ |
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[ |
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or use alternative risk financing mechanisms, or to make payments | ||
to the trust fund and procure reinsurance or use alternative risk | ||
financing mechanisms. | ||
(d) The commissioner by rule shall establish the procedure | ||
relating to the disbursement of money from the trust fund to | ||
policyholders and for association administrative expenses directly | ||
related to funding the payment of insured losses in the event of an | ||
occurrence or series of occurrences within a catastrophe area that | ||
results in a disbursement under Subchapter B-2 [ |
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SECTION 2.07. (a) Section 2210.453(c), Insurance Code, is | ||
amended to read as follows: | ||
(c) The attachment point for reinsurance purchased under | ||
this section may not be less than the aggregate amount of all | ||
funding available to the association under Subchapters | ||
[ |
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(b) Effective September 1, 2025, Sections 2210.453(b) and | ||
(c), Insurance Code, are amended to read as follows: | ||
(b) The association shall maintain total available loss | ||
funding in an amount not less than the probable maximum loss for the | ||
association for a catastrophe year with a probability of one in 100. | ||
If necessary, the required funding level shall be achieved through | ||
the purchase of reinsurance or the use of alternative financing | ||
mechanisms, or both, to operate in addition to or in concert with | ||
the trust fund, [ |
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assessments authorized by this chapter. | ||
(c) The attachment point for reinsurance purchased under | ||
this section may not be less than the aggregate amount of all | ||
funding available to the association under Subchapter B-2 [ |
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ARTICLE 3. TRANSITION AND SAVINGS PROVISIONS | ||
SECTION 3.01. Notwithstanding the repeal by this Act of | ||
Subchapters B-1 and M, Chapter 2210, Insurance Code, and other | ||
changes in law made by this Act effective September 1, 2025: | ||
(1) the payment of excess losses and operating | ||
expenses of the Texas Windstorm Insurance Association incurred | ||
before January 1, 2024, is governed by the law as it existed on the | ||
effective date of this Act, and that law is continued in effect for | ||
that purpose; | ||
(2) the issuance of public securities to pay excess | ||
losses and operating expenses of the Texas Windstorm Insurance | ||
Association incurred before January 1, 2024, the use of the | ||
proceeds of those securities, the repayment or refinancing of those | ||
securities, and any other rights, obligations, or limitations with | ||
respect to those securities and proceeds of those securities are | ||
governed by the law as it existed on the effective date of this Act, | ||
and that law is continued in effect for that purpose; and | ||
(3) proceeds of any assessments made under Subchapter | ||
B-1, Chapter 2210, Insurance Code, may not be included in reserves | ||
available for a catastrophe year for purposes of Section 2210.082, | ||
Insurance Code, as added by this Act, unless approved by the | ||
commissioner of insurance. | ||
ARTICLE 4. EFFECTIVE DATE | ||
SECTION 4.01. Except as otherwise provided by this Act, | ||
this Act takes effect September 1, 2023. |