Bill Text: TX HB429 | 2021-2022 | 87th Legislature | Introduced

---

Bill Title: Relating to the coverage of damage from tornadoes and wildfires by the Texas Windstorm Insurance Association.

Sponsorship: Partisan Bill (Republican 1)

Status: (Introduced - Dead) 2021-04-13 - Left pending in committee [HB429 Detail]

Download: Texas-2021-HB429-Introduced.html

---

87R1231 JES-D
By: King of Hemphill H.B. No. 429

A BILL TO BE ENTITLED
AN ACT
relating to the coverage of damage from tornadoes and wildfires by
the Texas Windstorm Insurance Association.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 2210.001, Insurance Code, is amended to
read as follows:
Sec. 2210.001. PURPOSE. The primary purpose of the Texas
Windstorm Insurance Association is the provision of an adequate
market for windstorm and hail insurance in the seacoast territory
of this state and tornado insurance and wildfire insurance
statewide. The legislature finds that the provision of adequate
windstorm and hail insurance, tornado insurance, and wildfire
insurance is necessary to the economic welfare of this state, and
without that insurance, the orderly growth and development of this
state would be severely impeded. This chapter provides a method by
which adequate windstorm and hail insurance may be obtained in
certain designated portions of the seacoast territory of this state
and tornado insurance and wildfire insurance may be obtained
statewide. The association is intended to serve as a residual
insurer of last resort for windstorm and hail insurance in the
seacoast territory and tornado insurance and wildfire insurance
statewide. The association shall:
(1) function in such a manner as to not be a direct
competitor in the private market; and
(2) provide windstorm and hail insurance coverage,
tornado insurance coverage, and wildfire insurance coverage to
those who are unable to obtain [that] coverage in the private
market.
SECTION 2. Section 2210.003, Insurance Code, is amended by
amending Subdivision (6) and adding Subdivisions (14), (15), and
(16) to read as follows:
(6) "Insurance" means:
(A) Texas windstorm and hail insurance;
(B) tornado insurance; and
(C) wildfire insurance.
(14) "Tornado insurance" means insurance against:
(A) direct loss to insurable property incurred as
a result of a tornado, as those terms are defined and limited in
policies and forms approved by the department; and
(B) indirect losses resulting from the direct
loss.
(15) "Wildfire" means an uncontrolled blaze fueled by
weather, wind, and dry underbrush, trees, grasses, and other
flammable material.
(16) "Wildfire insurance" means insurance against:
(A) direct loss to insurable property incurred as
a result of wildfire, as those terms are defined and limited in
policies and forms approved by the department; and
(B) indirect losses resulting from the direct
loss.
SECTION 3. Sections 2210.004(a), (b), (c), and (d),
Insurance Code, are amended to read as follows:
(a) Except as provided by Subsection (h), for purposes of
this chapter and subject to this section, "insurable property"
means immovable property at a fixed location in a catastrophe area
or corporeal movable property located in that immovable property,
as designated in the plan of operation, that is determined by the
association according to the criteria specified in the plan of
operation to be in an insurable condition against windstorm and
hail, tornado, and wildfire, as determined by normal underwriting
standards. The term includes property described by Section
2210.209.
(b) A structure located in a catastrophe area, construction
of which began on or after the 30th day after the date of
publication of the plan of operation, that is not built in
compliance with building specifications set forth in the plan of
operation or continued in compliance with those specifications,
does not constitute an insurable risk for purposes of windstorm and
hail insurance, tornado insurance, or wildfire insurance except as
otherwise provided by this chapter.
(c) A structure, or an addition to a structure, that is
constructed in conformity with plans and specifications that comply
with the specifications set forth in the plan of operation at the
time construction begins may not be declared ineligible for
windstorm and hail insurance, tornado insurance, or wildfire
insurance as a result of subsequent changes in the building
specifications set forth in the plan of operation.
(d) Except as otherwise provided by this section, if repair
of damage to a structure involves replacement of items covered in
the building specifications set forth in the plan of operation, the
repairs must be completed in a manner that complies with those
specifications for the structure to continue to be insurable
property for windstorm and hail insurance, tornado insurance, and
wildfire insurance.
SECTION 4. Sections 2210.005(a) and (c), Insurance Code,
are amended to read as follows:
(a) After at least 10 days' notice and a hearing, the
commissioner may designate, with respect to windstorm and hail
insurance, an area of the seacoast territory of this state as a
catastrophe area or, with respect to tornado insurance and wildfire
insurance, any area of this state as a catastrophe area if the
commissioner determines, unless such a determination results in an
adverse impact to the exposure of the association, that windstorm
and hail insurance, tornado insurance, or wildfire insurance is not
reasonably available to a substantial number of the owners of
insurable property located in the area [that territory] because the
area [territory] is subject to unusually frequent and severe damage
resulting from windstorms, [or] hailstorms, tornadoes, or
wildfires.
(c) If the association determines that windstorm and hail
insurance, tornado insurance, or wildfire insurance is no longer
reasonably unavailable to a substantial number of owners of
insurable property in a territory designated as a catastrophe area,
the association may request in writing that the commissioner revoke
the designation. After at least 10 days' notice and a hearing, but
not later than the 30th day after the date of the hearing, the
commissioner shall:
(1) approve the request and revoke the designation; or
(2) reject the request.
SECTION 5. Section 2210.009(a), Insurance Code, is amended
to read as follows:
(a) The department shall maintain a list of all insurers
that engage in the business of property and casualty insurance in
the voluntary market in a municipality or county that is or that
includes a catastrophe area [the seacoast territory].
SECTION 6. Section 2210.015(a), Insurance Code, is amended
to read as follows:
(a) Each biennium, the department shall conduct a study of
market incentives to promote participation in the voluntary
windstorm and hail insurance, tornado insurance, and wildfire
insurance markets [market] in [the seacoast territory of] this
state. The study must address as possible incentives the mandatory
or voluntary issuance of windstorm and hail insurance, tornado
insurance, and wildfire insurance in conjunction with the issuance
of a homeowners policy [in the seacoast territory].
SECTION 7. Section 2210.053(b), Insurance Code, is amended
to read as follows:
(b) The department may develop programs to improve the
efficient operation of the association, including a program for
approving policy forms under Section 2301.010 and a program
designed to create incentives for insurers to write windstorm and
hail insurance, tornado insurance, and wildfire insurance
voluntarily to cover property located in a catastrophe area,
especially property located on the barrier islands of this state.
SECTION 8. Section 2210.102(b), Insurance Code, is amended
to read as follows:
(b) Three members must be representatives of the insurance
industry who actively write and renew:
(1) tornado insurance or wildfire insurance; or
(2) windstorm and hail insurance in the first tier
coastal counties.
SECTION 9. Section 2210.151, Insurance Code, is amended to
read as follows:
Sec. 2210.151. ADOPTION OF PLAN OF OPERATION. With the
advice of the board of directors, the commissioner by rule shall
adopt the plan of operation to provide Texas windstorm and hail
insurance, tornado insurance, and wildfire insurance in a
catastrophe area.
SECTION 10. Section 2210.152(a), Insurance Code, is amended
to read as follows:
(a) The plan of operation must:
(1) provide for the efficient, economical, fair, and
nondiscriminatory administration of the association; and
(2) include:
(A) a plan for the equitable assessment of the
members of the association to defray losses and expenses;
(B) underwriting standards;
(C) procedures for accepting and ceding
reinsurance;
(D) procedures for obtaining and repaying
amounts under any financial instruments authorized under this
chapter;
(E) procedures for determining the amount of
insurance to be provided to specific risks;
(F) time limits and procedures for processing
applications for insurance;
(G) a requirement that a nonresident agent
licensed under Section 4056.052 may not offer or sell a Texas
windstorm and hail insurance policy, tornado insurance policy, or
wildfire insurance policy under this chapter unless the nonresident
agent's state of residence authorizes a resident agent licensed in
this state to act in the nonresident agent's state as an agent for
that state's residual insurer of last resort for windstorm and hail
insurance, tornado insurance, or wildfire insurance; and
(H) other provisions as considered necessary by
the department to implement the purposes of this chapter.
SECTION 11. Sections 2210.202(a) and (b), Insurance Code,
are amended to read as follows:
(a) A person who has an insurable interest in insurable
property may apply to the association for insurance coverage
provided under the plan of operation and an inspection of the
property, subject to any rules established by the board of
directors and approved by the commissioner. The association shall
make insurance available to each applicant in the catastrophe area
whose property is insurable property but who, after diligent
efforts, is unable to obtain property insurance through the
voluntary market, as evidenced by one declination from an insurer
authorized to engage in the business of, and writing, property
insurance providing windstorm and hail coverage in the first tier
coastal counties or tornado insurance or wildfire insurance in this
state. For purposes of this section, "declination" has the meaning
assigned by the plan of operation and shall include a refusal to
offer coverage for the perils of windstorm and hail, tornado, or
wildfire and the inability to obtain substantially equivalent
insurance coverage for the perils of windstorm and hail, tornado,
or wildfire. Notwithstanding Section 2210.203(c), evidence of one
declination every three calendar years is required before renewal
of an association policy.
(b) A property and casualty agent must submit an application
for initial insurance coverage on behalf of the applicant on forms
prescribed by the association. An application for initial coverage
must contain:
(1) a statement as to whether the applicant has
submitted or will submit the required premium payment from personal
funds or, if not, to whom a balance is or will be due; and
(2) a statement that the agent acting on behalf of the
applicant possesses proof of the declination described by
Subsection (a) and, with respect to windstorm and hail insurance,
proof of flood insurance coverage or unavailability of that
coverage as described by Section 2210.203(a-1).
SECTION 12. Section 2210.203(a-1), Insurance Code, is
amended to read as follows:
(a-1) This subsection applies only to windstorm and hail
insurance and a structure constructed, altered, remodeled, or
enlarged on or after September 1, 2009, and only for insurable
property located in areas designated by the commissioner.
Notwithstanding Subsection (a), if all or any part of the property
to which this subsection applies is located in Zone V or another
similar zone with an additional hazard associated with storm waves,
as defined by the National Flood Insurance Program, and if flood
insurance under that federal program is available, the association
may not issue an insurance policy for initial or renewal coverage
unless evidence that the property is covered by a flood insurance
policy is submitted to the association. An agent offering or
selling a Texas windstorm and hail insurance policy in any area
designated by the commissioner under this subsection shall offer
flood insurance coverage to the prospective insured, if that
coverage is available.
SECTION 13. Section 2210.2031(b), Insurance Code, is
amended to read as follows:
(b) The process established under Subsection (a) must:
(1) provide for the association to verify:
(A) the declination required by Section
2210.202;
(B) with respect to windstorm and hail coverage,
flood insurance coverage required by Section 2210.203; and
(C) any other information related to
insurability of a property, including changes to the condition or
value of the property that would affect the availability of
coverage or premium cost to insure the property; and
(2) provide an opportunity for the policyholder to
elect to cancel the policy before the policy automatically renews.
SECTION 14. Section 2210.205(a), Insurance Code, is amended
to read as follows:
(a) A windstorm and hail insurance policy, tornado
insurance policy, or wildfire insurance policy issued by the
association must:
(1) require an insured to file a claim under the policy
not later than the first anniversary of the date on which the damage
to property that is the basis of the claim occurs;
(2) contain, in boldface type, a conspicuous notice
concerning the resolution of disputes under the policy, including:
(A) the processes and deadlines for appraisal
under Section 2210.574 and alternative dispute resolution under
Section 2210.575;
(B) the binding effect of appraisal under Section
2210.574; and
(C) the necessity of complying with the
requirements of Subchapter L-1 to seek relief, including judicial
relief; and
(3) contain a conspicuous notice concerning the
availability of supplemental payments under the policy, including:
(A) a description of the process for requesting a
supplemental payment; and
(B) notice of applicable deadlines related to
supplemental payments.
SECTION 15. The heading to Section 2210.207, Insurance
Code, is amended to read as follows:
Sec. 2210.207. WINDSTORM AND HAIL INSURANCE, TORNADO
INSURANCE, AND WILDFIRE INSURANCE: REPLACEMENT COST COVERAGE.
SECTION 16. Sections 2210.207(b) and (e), Insurance Code,
are amended to read as follows:
(b) Subject to any applicable deductibles and the limits for
the coverage purchased by the insured, a windstorm and hail
insurance policy, tornado insurance policy, or wildfire insurance
policy issued by the association may include replacement cost
coverage for one- and two-family dwellings, including
outbuildings, as provided under the dwelling extension coverage in
the policy.
(e) Notwithstanding this chapter or any other law, the
commissioner, after notice and hearing, may adopt rules to:
(1) authorize the association to provide actual cash
value coverage instead of replacement cost coverage on the roof
covering of a building insured by the association; and
(2) establish:
(A) the conditions under which the association
may provide that actual cash value coverage;
(B) the appropriate premium reductions when
coverage for the roof covering is provided on an actual cash value
basis; and
(C) the disclosure that must be provided to the
policyholder, prominently displayed on the face of the windstorm
and hail insurance policy, tornado insurance policy, or wildfire
insurance policy.
SECTION 17. The heading to Section 2210.208, Insurance
Code, is amended to read as follows:
Sec. 2210.208. WINDSTORM AND HAIL INSURANCE, TORNADO
INSURANCE, AND WILDFIRE INSURANCE: COVERAGE FOR CERTAIN INDIRECT
LOSSES.
SECTION 18. Sections 2210.208(a) and (b), Insurance Code,
are amended to read as follows:
(a) Except as provided by Subsections (e) and (f), a
windstorm and hail insurance policy, tornado insurance policy, or
wildfire insurance policy issued by the association for a dwelling,
as that term is defined by the department or a successor to the
department, must include coverage for:
(1) with respect to a windstorm and hail insurance
policy, wind-driven rain damage, regardless of whether an opening
is made by the wind;
(2) loss of use; and
(3) consequential losses.
(b) A windstorm and hail insurance policy, tornado
insurance policy, or wildfire insurance policy issued by the
association for tenant contents of a dwelling or other residential
building must include coverage for loss of use and consequential
losses.
SECTION 19. The heading to Subchapter F, Chapter 2210,
Insurance Code, is amended to read as follows:
SUBCHAPTER F. PROPERTY INSPECTIONS [FOR WINDSTORM AND HAIL
INSURANCE]
SECTION 20. Section 2210.253, Insurance Code, is amended to
read as follows:
Sec. 2210.253. INITIAL INSURER ASSESSMENT[: FIRST TIER
COASTAL COUNTY]. (a) In this section, "property insurance" means a
commercial or residential insurance policy prescribed or approved
by the department that provides coverage for windstorm and hail
damage, including a Texas windstorm and hail insurance policy, or
loss from tornado or wildfire.
(b) The department shall assess each insurer that provides
property insurance in [a first tier coastal county in] accordance
with this section.
(c) The total assessment under this section in a state
fiscal year must be in the amount estimated by the department as
necessary to cover the administrative costs of the [windstorm]
inspection program under Section 2210.251 to be incurred in [the
first tier coastal counties in] that fiscal year.
(d) The assessment must be based on each insurer's
proportionate share of the total extended coverage and other allied
lines premium received by all insurers for property insurance in
the state [first tier coastal counties] in the calendar year
preceding the year in which the assessment is made.
(e) The commissioner shall adopt rules to implement the
assessment of insurers under this section.
SECTION 21. Section 2210.2551(b), Insurance Code, is
amended to read as follows:
(b) The commissioner by rule shall establish criteria to
ensure that a person seeking appointment as a qualified inspector
under this subchapter possesses the knowledge, understanding, and
professional competence to perform [windstorm] inspections for the
issuance of a certificate of compliance under Section 2210.2515(d)
and to comply with other requirements of this chapter.
SECTION 22. Section 2210.258, Insurance Code, is amended by
adding Subsection (a-1) to read as follows:
(a-1) This section applies only to windstorm and hail
insurance.
SECTION 23. Section 2210.3511(a), Insurance Code, is
amended to read as follows:
(a) The association shall make the association's rate
adequacy analysis publicly available on its Internet website for at
least 14 days before the date the board of directors votes on the
submission of a proposed rate filing based on the analysis to the
department. The rate adequacy analysis must include:
(1) all user selected hurricane, tornado, or wildfire
model input assumptions; and
(2) output data:
(A) with the same content and in the same format
that is customarily provided to:
(i) the association by hurricane modelers;
and
(ii) the department by the association; and
(B) in a searchable electronic format that allows
for efficient analysis and is sufficiently detailed to allow the
historical experience in this state to be compared to results
produced by the model.
SECTION 24. Section 2210.355(g), Insurance Code, is amended
to read as follows:
(g) A commission paid to an agent for a windstorm and hail
insurance policy, tornado insurance policy, or wildfire insurance
policy issued by the association must comply with the commission
structure approved by the commissioner under Section 2210.203(d)
and be reasonable, adequate, not unfairly discriminatory, and
nonconfiscatory.
SECTION 25. Section 2210.359(a), Insurance Code, is amended
to read as follows:
(a) Except as otherwise provided by this subsection, a rate
approved by the commissioner under this subchapter may not reflect
an average rate change that is more than 10 percent higher or lower
than the rate for commercial windstorm and hail insurance,
commercial tornado insurance, or commercial wildfire insurance or
10 percent higher or lower than the rate for noncommercial
windstorm and hail insurance, noncommercial tornado insurance, or
noncommercial wildfire insurance in effect on the date the filing
is made. The rate may not reflect a rate change for an individual
rating class that is 15 percent higher or lower than the rate for
that individual rating class in effect on the date the filing is
made. This subsection does not apply to a rate filed under Sections
2210.351(a)-(d).
SECTION 26. Section 2210.455(b), Insurance Code, is amended
to read as follows:
(b) The catastrophe plan must:
(1) describe the manner in which the association will,
during the period covered by the plan, evaluate losses and process
claims after the following windstorms affecting an area of maximum
exposure to the association:
(A) a windstorm with a four percent chance of
occurring during the period covered by the plan;
(B) a windstorm with a two percent chance of
occurring during the period covered by the plan; and
(C) a windstorm with a one percent chance of
occurring during the period covered by the plan; [and]
(2) include, if the association does not purchase
reinsurance under Section 2210.453 for the period covered by the
plan, an actuarial plan for paying losses in the event of a
catastrophe with estimated damages of $2.5 billion or more; and
(3) describe the manner in which the association will,
during the period covered by the plan, evaluate losses and process
claims after tornadoes or wildfires affecting an area of maximum
exposure to the association.
SECTION 27. Section 2210.501(a), Insurance Code, is amended
to read as follows:
(a) The board of directors shall propose the maximum
liability limits under a windstorm and hail insurance policy,
tornado insurance policy, and wildfire insurance policy issued by
the association under this chapter. The maximum liability limits
are considered approved by the commissioner unless the commissioner
disapproves or modifies the liability limits by order issued not
later than the 30th day after the date of receipt of a filing under
Section 2210.503.
SECTION 28. Section 2210.502(b), Insurance Code, is amended
to read as follows:
(b) An adjustment to the maximum liability limits that is
approved by the commissioner applies to each windstorm and hail
insurance policy, tornado insurance policy, and wildfire insurance
policy delivered, issued for delivery, or renewed on or after
January 1 of the year following the date of the approval. The
indexing of the limits shall adjust for changes occurring on and
after January 1, 1997.
SECTION 29. Section 2210.505(a), Insurance Code, is amended
to read as follows:
(a) Notwithstanding any other law, the association may
issue a windstorm and hail insurance policy, tornado insurance
policy, or wildfire insurance policy that includes coverage for an
amount in excess of a maximum liability limit established under
Sections 2210.501-2210.504 if the association first obtains from a
reinsurer approved by the commissioner reinsurance for the full
amount of policy exposure above that limit.
SECTION 30. Section 2210.571(1), Insurance Code, is amended
to read as follows:
(1) "Association policy" means a windstorm and hail
insurance policy, tornado insurance policy, or wildfire insurance
policy issued by the association.
SECTION 31. Section 2210.5732(a), Insurance Code, is
amended to read as follows:
(a) The association is authorized to provide for
supplemental payments under a windstorm and hail insurance policy,
tornado insurance policy, and wildfire insurance policy issued by
the association.
SECTION 32. Section 2210.601, Insurance Code, is amended to
read as follows:
Sec. 2210.601. PURPOSE. The legislature finds that
authorizing the issuance of public securities to provide a method
to raise funds to provide [windstorm and hail insurance] through
the association windstorm and hail insurance in certain designated
portions of the state and tornado insurance and wildfire insurance
statewide is for the benefit of the public and in furtherance of a
public purpose.
SECTION 33. Section 2210.6132(c), Insurance Code, is
amended to read as follows:
(c) The premium surcharge under this section shall be
assessed on all policyholders of policies that cover insured
property that is located in a catastrophe area, including
automobiles principally garaged in a catastrophe area. The premium
surcharge shall be assessed on each Texas windstorm and hail
insurance policy, each tornado insurance policy, and each wildfire
insurance policy issued by the association and each property and
casualty policy, including an automobile insurance policy, issued
for automobiles and other property located in the catastrophe area.
A premium surcharge under Subsection (b) applies to:
(1) all policies written under the following lines of
insurance:
(A) fire and allied lines;
(B) farm and ranch owners;
(C) residential property insurance;
(D) private passenger automobile liability and
physical damage insurance; and
(E) commercial automobile liability and physical
damage insurance; and
(2) the property insurance portion of a commercial
multiple peril insurance policy.
SECTION 34. Section 2210.652, Insurance Code, is amended to
read as follows:
Sec. 2210.652. COMPOSITION OF BOARD. The [windstorm
insurance legislative oversight] board is composed of eight members
as follows:
(1) four members of the senate appointed by the
lieutenant governor, including the chairperson of the Senate
Business and Commerce Committee, who shall serve as co-chairperson
of the board; and
(2) four members of the house of representatives
appointed by the speaker of the house of representatives.
SECTION 35. Section 2210.653(a), Insurance Code, is amended
to read as follows:
(a) The board shall:
(1) receive information about rules proposed by the
department relating to windstorm and hail insurance, tornado
insurance, and wildfire insurance, and may submit comments to the
commissioner on the proposed rules;
(2) monitor windstorm and hail insurance, tornado
insurance, and wildfire insurance in this state, including:
(A) the adequacy of rates;
(B) the operation of the association; and
(C) the availability of coverage; and
(3) review recommendations for legislation proposed
by the department or the association.
SECTION 36. Section 2210.654(b), Insurance Code, is amended
to read as follows:
(b) The report must include:
(1) an analysis of any problems identified; and
(2) recommendations for any legislative action
necessary to address those problems and to foster stability,
availability, and competition within the windstorm and hail
insurance, tornado insurance, and wildfire insurance industries
[industry].
SECTION 37. (a) The plan of operation adopted under
Chapter 2210, Insurance Code, as amended by this Act, must provide
that the Texas Windstorm Insurance Association issue tornado
insurance policies and wildfire insurance policies under that
chapter not later than January 1, 2022.
(b) The commissioner of insurance shall adopt rules
necessary to ensure that the Texas Windstorm Insurance Association
issue insurance policies under Chapter 2210, Insurance Code, as
amended by this Act, not later than January 1, 2022.
SECTION 38. This Act takes effect September 1, 2021.