Bill Text: TX HB696 | 2015-2016 | 84th Legislature | Introduced
Bill Title: Relating to the operation of the Texas Windstorm Insurance Association; affecting surcharges.
Spectrum: Bipartisan Bill
Status: (Introduced - Dead) 2015-04-22 - Left pending in committee [HB696 Detail]
Download: Texas-2015-HB696-Introduced.html
84R2797 PMO-D | ||
By: Hunter | H.B. No. 696 |
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relating to the operation of the Texas Windstorm Insurance | ||
Association; affecting surcharges. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. Subchapter A, Chapter 2210, Insurance Code, is | ||
amended by adding Section 2210.015 to read as follows: | ||
Sec. 2210.015. STUDY OF MARKET INCENTIVES; BIENNIAL | ||
REPORTING. (a) Each biennium, the department shall conduct a study | ||
of market incentives to promote participation in the voluntary | ||
windstorm and hail insurance market in the seacoast territory. The | ||
study must address as possible incentives the mandatory or | ||
voluntary issuance of windstorm and hail insurance in conjunction | ||
with the issuance of a homeowners policy or other residential | ||
property insurance policy in the seacoast territory. | ||
(b) The department shall include the results of the study | ||
conducted under this section in the report submitted under Section | ||
32.022. | ||
SECTION 2. Subchapter B-1, Chapter 2210, Insurance Code, is | ||
amended by amending Section 2210.071 and adding Sections 2210.0715 | ||
and 2210.0716 to read as follows: | ||
Sec. 2210.071. PAYMENT OF EXCESS LOSSES[ |
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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. | ||
Sec. 2210.0715. PAYMENT FROM RESERVES AND TRUST FUND. [ |
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The association shall pay losses in excess of premium and other | ||
revenue of the association from available reserves of the | ||
association and available amounts in the catastrophe reserve trust | ||
fund. | ||
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Sec. 2210.0716. PAYMENT FROM CLASS 1 ASSESSMENTS. (a) | ||
Losses in a catastrophe year not paid under Section 2210.0715 shall | ||
be paid as provided by this section from Class 1 member assessments | ||
not to exceed $500 million for that catastrophe year. | ||
(b) The association, with the approval of the commissioner, | ||
shall notify each member of the amount of the member's assessment | ||
under this section. The proportion of the losses 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. | ||
SECTION 3. Sections 2210.072(a), (b), (b-1), (c), and (f), | ||
Insurance Code, are amended to read as follows: | ||
(a) Losses not paid under Sections 2210.0715 and 2210.0716 | ||
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from the proceeds from Class 1 public securities authorized to be | ||
issued in accordance with Subchapter M before, on, or after the date | ||
of any occurrence or series of occurrences that results in insured | ||
losses. Public securities issued under this section must be paid | ||
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paid [ |
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the commissioner approves, except that early payment may not result | ||
in an increase to any assessment or premium surcharge imposed under | ||
this chapter. | ||
(b) Public securities described by Subsection (a) that are | ||
issued before an occurrence or series of occurrences that results | ||
in incurred losses: | ||
(1) may be issued on the request of the board of | ||
directors with the approval of the commissioner; and | ||
(2) may not, in the aggregate, exceed $500 million [ |
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in which the outstanding public securities were issued. | ||
(b-1) Public securities described by Subsection (a): | ||
(1) shall be issued as necessary in a principal amount | ||
not to exceed $500 million [ |
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aggregate, for securities issued during that catastrophe year | ||
before the occurrence or series of occurrences that results in | ||
incurred losses in that year and securities issued on or after the | ||
date of that occurrence or series of occurrences, and regardless of | ||
whether for a single occurrence or a series of occurrences; and | ||
(2) subject to the [ |
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Subdivision (1), may be issued, in one or more issuances or | ||
tranches, during the calendar year in which the occurrence or | ||
series of occurrences occurs or, if the public securities cannot | ||
reasonably be issued in that year, during the following calendar | ||
year. | ||
(c) If public securities are issued as described by this | ||
section, the public securities shall be paid [ |
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prescribed by Subchapter M [ |
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(f) If, under Subsection (e), the proceeds of any | ||
outstanding public securities issued during a previous catastrophe | ||
year must be depleted, those proceeds shall count against the $500 | ||
million [ |
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section in the catastrophe year in which the proceeds must be | ||
depleted. | ||
SECTION 4. Subchapter B-1, Chapter 2210, Insurance Code, is | ||
amended by adding Section 2210.0725 to read as follows: | ||
Sec. 2210.0725. PAYMENT FROM CLASS 2 ASSESSMENTS. (a) | ||
Losses in a catastrophe year not paid under Sections 2210.0715, | ||
2210.0716, and 2210.072 shall be paid as provided by this section | ||
from Class 2 member assessments not to exceed $500 million for that | ||
catastrophe year. | ||
(b) The association, with the approval of the commissioner, | ||
shall notify each member of the amount of the member's assessment | ||
under this section. The proportion of the losses 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. | ||
SECTION 5. Sections 2210.073 and 2210.074, Insurance Code, | ||
are amended to read as follows: | ||
Sec. 2210.073. PAYMENT FROM CLASS 2 PUBLIC SECURITIES. (a) | ||
Losses not paid under Sections 2210.0715, 2210.0716, [ |
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2210.072, and 2210.0725 shall be paid as provided by this section | ||
from the proceeds from Class 2 public securities authorized to be | ||
issued in accordance with Subchapter M on or after the date of any | ||
occurrence or series of occurrences that results in insured losses | ||
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section must be paid [ |
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years[ |
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elects to do so and the commissioner approves, except that early | ||
payment may not result in an increase to any assessment or premium | ||
surcharge imposed under this chapter. | ||
(b) Public securities described by Subsection (a): | ||
(1) shall [ |
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amount not to exceed $500 million [ |
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year, in the aggregate, whether for a single occurrence or a series | ||
of occurrences; and | ||
(2) subject to the [ |
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Subdivision (1), may be issued, in one or more issuances or | ||
tranches, during the calendar year in which the occurrence or | ||
series of occurrences occurs or, if the public securities cannot | ||
reasonably be issued in that year, during the following calendar | ||
year. | ||
(c) If the losses are paid with public securities described | ||
by this section, the public securities shall be paid [ |
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manner prescribed by Subchapter M. | ||
Sec. 2210.074. PAYMENT FROM [ |
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SECURITIES. (a) Losses not paid under Sections 2210.0715, | ||
2210.0716, [ |
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paid as provided by this section from the proceeds from Class 3 | ||
public securities authorized to be issued in accordance with | ||
Subchapter M on or after the date of any occurrence or series of | ||
occurrences that results in insured losses [ |
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securities issued under this section must be paid [ |
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period not to exceed 10 years[ |
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the board of directors elects to do so and the commissioner | ||
approves, except that early payment may not result in an increase to | ||
any assessment or premium surcharge imposed under this chapter. | ||
(b) Public securities described by Subsection (a): | ||
(1) shall [ |
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amount not to exceed $1 billion [ |
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year, in the aggregate, whether for a single occurrence or a series | ||
of occurrences; and | ||
(2) subject to the [ |
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Subdivision (1), may be issued, in one or more issuances or | ||
tranches, during the calendar year in which the occurrence or | ||
series of occurrences occurs or, if the public securities cannot | ||
reasonably be issued in that year, during the following calendar | ||
year. | ||
(c) If the losses are paid with public securities described | ||
by this section, the public securities shall be paid [ |
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manner prescribed by Subchapter M [ |
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SECTION 6. Section 2210.102, Insurance Code, is amended by | ||
amending Subsections (a), (b), (c), (d), (e), and (f) and adding | ||
Subsections (c-1), (d-1), and (d-2) to read as follows: | ||
(a) The board of directors is composed of nine members | ||
appointed by the governor [ |
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section. | ||
(b) Three [ |
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insurance industry who actively write and renew windstorm and hail | ||
insurance in the seacoast territory. | ||
(c) Three [ |
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appointment, reside in the first tier coastal counties. Each of | ||
the following regions must be represented by a member residing in | ||
the region and [ |
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subsection: | ||
(1) the region consisting of Cameron, Kenedy, Kleberg, | ||
and Willacy Counties; | ||
(2) the region consisting of Aransas, Calhoun, Nueces, | ||
Refugio, and San Patricio Counties; and | ||
(3) the region consisting of Brazoria, Chambers, | ||
Galveston, Jefferson, and Matagorda Counties and any part of Harris | ||
County designated as a catastrophe area under Section 2210.005. | ||
(c-1) One of the members appointed under Subsection (c) must | ||
be a property and casualty agent who is licensed under this code and | ||
is not a captive agent. | ||
(d) One member must be a representative of an area of this | ||
state that is not located in the seacoast territory [ |
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(d-1) One member must be an engineer who: | ||
(1) is knowledgeable of, and has professional | ||
expertise in, wind-related design and construction practices in | ||
coastal areas that are subject to high winds and hurricanes; and | ||
(2) resides in a second tier coastal county. | ||
(d-2) One member must be a representative of the financial | ||
industry who resides in a second tier coastal county. | ||
(e) All members must have demonstrated experience in | ||
insurance, general business, or actuarial principles and the | ||
member's area of expertise, if any, sufficient to make the success | ||
of the association probable. | ||
(f) Insurers who are members of the association shall | ||
nominate, from among those members, persons to fill any vacancy in | ||
the three [ |
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representatives of the insurance industry. The board of directors | ||
shall solicit nominations from the members and submit the | ||
nominations to the governor [ |
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submitted to the governor [ |
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include at least three more names than the number of vacancies. The | ||
governor may [ |
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industry representatives from the nominee slate. | ||
SECTION 7. Section 2210.103(c), Insurance Code, is amended | ||
to read as follows: | ||
(c) A member of the board of directors may be removed by the | ||
governor [ |
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the association's website. The governor [ |
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appoint a replacement in accordance with [ |
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Section 2210.102 for a member who leaves or is removed from the | ||
board of directors. | ||
SECTION 8. Subchapter E, Chapter 2210, Insurance Code, is | ||
amended by adding Sections 2210.2022, 2210.211, and 2210.212 to | ||
read as follows: | ||
Sec. 2210.2022. INFORMATION REQUIRED FOR CERTAIN | ||
APPLICATIONS. (a) An applicant for new or renewal association | ||
coverage to take effect on or after January 1, 2016, must include in | ||
the application the information described by Subsection (b) if the | ||
applicant has coverage against loss incurred to real or tangible | ||
personal property at the fixed location for which association | ||
coverage is sought that is provided under a residential property | ||
insurance policy, including a residential fire and allied lines | ||
insurance policy, a farm and ranch owners insurance policy, a | ||
condominium owners policy, or a tenants policy. | ||
(b) The applicant must include in the application the | ||
following information for each policy providing coverage described | ||
by Subsection (a): | ||
(1) the total premium for the policy, including a | ||
policy number for coverage issued by the FAIR Plan Association | ||
under Chapter 2211, if applicable, and: | ||
(A) the amount of insurance under the policy on | ||
the dwelling and contents; or | ||
(B) if the policy is a tenants policy or | ||
condominium owners policy, the insured amount for the contents | ||
coverage; and | ||
(2) the deductibles applicable for the policy. | ||
Sec. 2210.211. EXPOSURE REDUCTION PLAN. (a) The | ||
association shall reduce the association's total insured exposure | ||
determined as of January 1, 2015, according to the following | ||
schedule: | ||
(1) not later than January 1, 2018, the amount of the | ||
association's total insured exposure must reflect a 20 percent | ||
reduction from the association's total insured exposure as of | ||
January 1, 2015; | ||
(2) not later than January 1, 2020, the amount of the | ||
association's total insured exposure must reflect a 35 percent | ||
reduction from the association's total insured exposure as of | ||
January 1, 2015; | ||
(3) not later than January 1, 2022, the amount of the | ||
association's total insured exposure must reflect a 45 percent | ||
reduction from the association's total insured exposure as of | ||
January 1, 2015; | ||
(4) not later than January 1, 2024, the amount of the | ||
association's total insured exposure must reflect a 55 percent | ||
reduction from the association's total insured exposure as of | ||
January 1, 2015; and | ||
(5) not later than January 1, 2026, the amount of the | ||
association's total insured exposure must reflect a 60 percent | ||
reduction from the association's total insured exposure as of | ||
January 1, 2015. | ||
(b) As soon as practicable after January 1, 2018, January 1, | ||
2020, January 1, 2022, and January 1, 2026, respectively, the board | ||
of directors shall determine whether the reductions in the | ||
association's total insured exposure required under Subsection (a) | ||
have been achieved. | ||
(c) If on January 1, 2018, the association did not achieve | ||
the reduction in the total insured exposure required by Subsection | ||
(a)(1), the board of directors shall establish a plan to reduce the | ||
association's total insured exposure, which must include imposing | ||
an assessment as described by Subsection (f). | ||
(d) If on January 1, 2020, January 1, 2022, and January 1, | ||
2026, respectively, the association did not achieve the reduction | ||
in the total insured exposure required for that date, the board of | ||
directors shall establish a plan to reduce the association's total | ||
insured exposure, which must include imposing an assessment as | ||
described by Subsection (f). | ||
(e) An exposure reduction plan under Subsection (c) or (d) | ||
must be implemented not later than March 31 in the year in which the | ||
board of directors determines that the required reduction was not | ||
achieved and must result in the achievement of the required | ||
reduction by not later than December 31 of that year. | ||
(f) An assessment imposed under this section must be paid | ||
into the exposure reduction plan fund and is assessed against each | ||
member of the association that, as determined by the board of | ||
directors, has not met the member's proportionate responsibility | ||
for reduction of the association's total insured exposure. The | ||
total aggregate amount of an assessment under this section, if | ||
assessed against all members of the association, is $200 million. | ||
(g) The amount of a member's assessment paid under | ||
Subsection (f) must be equal to the portion of $200 million that is | ||
consistent with the member's proportionate participation in the | ||
association as determined under Section 2210.052. | ||
(h) A member of the association may not recoup an assessment | ||
paid under this section through a premium surcharge or tax credit or | ||
through a rate increase. | ||
(i) At the request of the commissioner, but not less | ||
frequently than twice each year, the association shall submit a | ||
report to the commissioner detailing the amount of the | ||
association's total insured exposure and any statistical | ||
information or experience data requested by the commissioner | ||
concerning the characteristics of that exposure. | ||
(j) Not later than May 15 and November 15 of each year, the | ||
commissioner shall submit a report to the windstorm insurance | ||
legislative oversight board established under Subchapter N | ||
summarizing the contents of the report submitted to the | ||
commissioner under Subsection (i). | ||
(k) In determining whether the association has met the goal | ||
established under Subsection (a), the commissioner shall make | ||
adjustments to book value of the total insured exposure as of | ||
January 1, 2015, to reflect any change in the BOECKH Index. If the | ||
BOECKH Index ceases to exist, the commissioner shall make | ||
adjustments in the same manner based on another index that the board | ||
of directors determines accurately reflects changes in the cost of | ||
construction or residential values in the catastrophe area. | ||
(l) Not later than January 1 of each year, the department | ||
shall notify each member of the association of the member's | ||
proportionate share of the association's total insured exposure | ||
required to be reduced under this section and of the member's | ||
potential liability for an assessment under this section. | ||
(m) The commissioner shall adopt rules necessary to | ||
implement and enforce this section. | ||
Sec. 2210.212. CONFIDENTIAL INFORMATION. (a) Except as | ||
provided by Subsection (b), all information, data, and databases | ||
collected and used under Sections 2210.2022 and 2210.211 are | ||
confidential information not subject to disclosure under Chapter | ||
552, Government Code. | ||
(b) Information described by Subsection (a) may be used for | ||
the purposes and in the manner described by this chapter. | ||
SECTION 9. The heading to Subchapter J, Chapter 2210, | ||
Insurance Code, is amended to read as follows: | ||
SUBCHAPTER J. CATASTROPHE RESERVE TRUST FUND; [ |
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ALTERNATIVE RISK FINANCING [ |
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SECTION 10. Section 2210.451, Insurance Code, is amended to | ||
read as follows: | ||
Sec. 2210.451. DEFINITION. Except to the extent that | ||
context clearly requires otherwise, in [ |
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fund" means the catastrophe reserve trust fund. | ||
SECTION 11. Section 2210.452, Insurance Code, is amended by | ||
amending Subsections (a), (c), and (d) and adding Subsection (f) 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 | ||
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funding the payment of insured losses, including: | ||
(1) funding [ |
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fund under Subchapter B-1; and | ||
(2) purchasing reinsurance or using alternative risk | ||
financing mechanisms under Sections 2210.453 and 2210.4531. | ||
(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, operating expenses, | ||
deposits to the fund established under Section 2210.4521, public | ||
security obligations, and public security administrative expenses, | ||
to make payments to the trust fund, to procure reinsurance, or to | ||
make payments to the trust fund and [ |
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(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. | ||
(f) The commissioner by rule shall establish the procedure | ||
relating to the disbursement of money from the trust fund to pay for | ||
operating expenses, including reinsurance or alternative risk | ||
financing mechanisms under Sections 2210.453 and 2210.4531, if the | ||
association does not have sufficient premium and other revenue. | ||
SECTION 12. Subchapter J, Chapter 2210, Insurance Code, is | ||
amended by adding Section 2210.4521 to read as follows: | ||
Sec. 2210.4521. DEDICATED DISTRIBUTIONS TO CATASTROPHE | ||
RESERVE TRUST FUND. (a) Notwithstanding any other provision in | ||
this chapter, as provided for in the plan of operation, the | ||
association shall deposit monthly in a fund, separate from the | ||
catastrophe reserve trust fund established under Section 2210.452, | ||
an amount sufficient to accumulate on an annual calendar year basis | ||
an amount equal to 30 percent of the association's earned premium | ||
for the preceding calendar year. | ||
(b) The fund described by Subsection (a) is a trust fund | ||
with the Texas Treasury Safekeeping Trust Company to be held | ||
outside the state treasury. | ||
(c) Not later than February 1 of each year the association | ||
shall direct the Texas Treasury Safekeeping Trust Company to | ||
deposit all amounts deposited in the fund described by Subsection | ||
(a) during the preceding calendar year, and interest earned on | ||
those amounts, into the catastrophe reserve trust fund. | ||
(d) Money deposited in the fund described by Subsection (a) | ||
is irrevocably pledged to be distributed to the catastrophe reserve | ||
trust fund as provided in this section and is exempt from any other | ||
claim or attachment under law. | ||
(e) Money deposited under this section may be invested by | ||
the Texas Treasury Safekeeping Trust Company as permitted by | ||
general law. | ||
SECTION 13. Section 2210.453, Insurance Code, is amended to | ||
read as follows: | ||
Sec. 2210.453. REINSURANCE AND ALTERNATIVE RISK FINANCING. | ||
(a) The association may[ |
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financing mechanisms in an aggregate amount not greater than $1 | ||
billion. | ||
(b) The [ |
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alternative risk financing mechanisms used under this section | ||
operate [ |
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and 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-1. [ |
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SECTION 14. Subchapter J, Chapter 2210, Insurance Code, is | ||
amended by adding Section 2210.4531 to read as follows: | ||
Sec. 2210.4531. ADDITIONAL REINSURANCE. (a) The | ||
association may purchase, in addition to any reinsurance purchased | ||
or alternative risk financing mechanism used under Section | ||
2210.453, reinsurance in an amount not greater than the lesser of: | ||
(1) $800 million; or | ||
(2) an amount such that the association's total loss | ||
funding is sufficient to fund its probable maximum loss for a | ||
catastrophe year with a probability of one in 100. | ||
(b) 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-1 and | ||
Section 2210.453. | ||
(c) The association shall assess member insurers the cost of | ||
reinsurance purchased under this section. The proportion of the | ||
reinsurance cost 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. | ||
SECTION 15. 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 or use an alternative risk financing mechanism under | ||
this subchapter [ |
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plan, an actuarial plan for paying losses in the event of a | ||
catastrophe with estimated damages equal to or greater than the | ||
total amount of potential funding available through assessments and | ||
public securities under Subchapter B-1 [ |
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SECTION 16. Subchapter L-1, Chapter 2210, Insurance Code, | ||
is amended by adding Section 2210.5725 to read as follows: | ||
Sec. 2210.5725. ADJUSTMENT OF CLAIMS BY PRIMARY INSURER. | ||
An insurer that has primary coverage on property for loss by fire | ||
must adjust all claims made on an association policy covering the | ||
same property. | ||
SECTION 17. Section 2210.602, Insurance Code, is amended by | ||
adding Subdivisions (2-a), (3-a), and (4-a) to read as follows: | ||
(2-a) "Class 1 public security trust fund" means the | ||
dedicated trust fund established by the board and held by the Texas | ||
Treasury Safekeeping Trust Company into which premium surcharges | ||
collected under Section 2210.612 for the purpose of repaying Class | ||
1 public securities are deposited. | ||
(3-a) "Class 2 public security trust fund" means the | ||
dedicated trust fund established by the board and held by the Texas | ||
Treasury Safekeeping Trust Company into which premium surcharges | ||
collected under Section 2210.613 for the purpose of repaying Class | ||
2 public securities are deposited. | ||
(4-a) "Class 3 public security trust fund" means the | ||
dedicated trust fund established by the board and held by the Texas | ||
Treasury Safekeeping Trust Company into which premium surcharges | ||
collected under Section 2210.6135 for the purpose of repaying Class | ||
3 public securities are deposited. | ||
SECTION 18. Section 2210.609, Insurance Code, is amended to | ||
read as follows: | ||
Sec. 2210.609. REPAYMENT OF ASSOCIATION'S PUBLIC SECURITY | ||
OBLIGATIONS. (a) The board and the association shall enter into an | ||
agreement under which the association shall provide for the payment | ||
of all public security obligations from available funds collected | ||
by the association and deposited as required by this subchapter | ||
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association determines that it is unable to pay the public security | ||
obligations and public security administrative expenses, if any, | ||
with available funds, the association shall pay those obligations | ||
and expenses in accordance with Sections 2210.612, 2210.613, and | ||
2210.6135, [ |
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Class 3 public securities may be issued on a parity or subordinate | ||
lien basis with other Class 1, Class 2, or Class 3 public | ||
securities, respectively. | ||
(b) If any public securities issued under this chapter are | ||
outstanding, the authority shall notify the association of the | ||
amount of the public security obligations and the estimated amount | ||
of public security administrative expenses, if any, each calendar | ||
year in a period sufficient, as determined by the association, to | ||
permit the association to determine the availability of funds[ |
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(c) The association shall deposit all revenue collected | ||
under Section 2210.612 in the Class 1 public security trust fund | ||
[ |
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under Section 2210.613 [ |
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[ |
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Section [ |
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security [ |
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may be invested as permitted by general law. Money in a fund | ||
required to be used to pay public security obligations and public | ||
security administrative expenses, if any, shall be transferred to | ||
the appropriate funds in the manner and at the time specified in the | ||
proceedings authorizing the public securities to ensure timely | ||
payment of obligations and expenses. This may include the board | ||
establishing funds and accounts with the comptroller that the board | ||
determines are necessary to administer and repay the public | ||
security obligations. If the association has not transferred | ||
amounts sufficient to pay the public security obligations to the | ||
board's designated interest and sinking fund in a timely manner, | ||
the board may direct the Texas Treasury Safekeeping Trust Company | ||
to transfer from the Class 1 public security [ |
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the Class 2 public security trust fund, or the Class 3 public | ||
security [ |
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the amount necessary to pay the public security obligation. | ||
(d) The association shall provide for the payment of the | ||
public security obligations and the public security administrative | ||
expenses by irrevocably pledging revenues received from premiums, | ||
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the Class 1 public security [ |
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security trust fund, and the Class 3 public security [ |
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fund, as provided in the proceedings authorizing the public | ||
securities and related credit agreements. | ||
(e) An amount owed by the board under a credit agreement | ||
shall be payable from and secured by a pledge of revenues received | ||
by the association [ |
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fund, [ |
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fund, and the Class 3 public security trust fund, to the extent | ||
provided in the proceedings authorizing the credit agreement. | ||
SECTION 19. Section 2210.610(a), Insurance Code, is amended | ||
to read as follows: | ||
(a) Revenues received from the premium surcharges under | ||
Sections 2210.612, [ |
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provided by this subchapter. | ||
SECTION 20. Section 2210.611, Insurance Code, is amended to | ||
read as follows: | ||
Sec. 2210.611. EXCESS REVENUE COLLECTIONS AND INVESTMENT | ||
EARNINGS. Revenue collected in any calendar year from a premium | ||
surcharge under Sections 2210.612, [ |
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amount of the public security obligations and public security | ||
administrative expenses payable in that calendar year and interest | ||
earned on the funds [ |
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discretion of the association, be: | ||
(1) used to pay public security obligations payable in | ||
the subsequent calendar year, offsetting the amount of the premium | ||
surcharge [ |
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otherwise be required to be levied for the year under this | ||
subchapter; | ||
(2) used to redeem or purchase outstanding public | ||
securities; or | ||
(3) deposited in the catastrophe reserve trust fund. | ||
SECTION 21. Section 2210.612, Insurance Code, is amended to | ||
read as follows: | ||
Sec. 2210.612. PAYMENT OF CLASS 1 PUBLIC SECURITIES. | ||
(a) The association shall pay Class 1 public securities issued | ||
under Section 2210.072 from: | ||
(1) [ |
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(2) if net premium and other revenue are not | ||
sufficient to pay the securities, a catastrophe area premium | ||
surcharge collected in accordance with this section. | ||
(b) On approval by the commissioner, the association and | ||
each insurer that provides insurance in a catastrophe area shall | ||
assess, as provided by this section, a premium surcharge to each | ||
policyholder of a policy described by Subsection (c). The premium | ||
surcharge must be set in an amount sufficient to pay, for the | ||
duration of the issued public securities, all debt service not | ||
already covered by available funds and all related expenses on the | ||
public securities. | ||
(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 and each property and casualty insurance policy, | ||
including an automobile insurance policy, issued for automobiles | ||
and other property located in the catastrophe area. The premium | ||
surcharge 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. | ||
(d) A premium surcharge under this section is a separate | ||
charge in addition to the premiums collected and is not subject to | ||
premium tax or commissions. Failure by a policyholder to pay the | ||
surcharge constitutes failure to pay premium for purposes of policy | ||
cancellation. | ||
(e) [ |
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as described by Section 2210.072(d) as necessary to obtain public | ||
securities issued under Section 2210.072. Nothing in this | ||
subsection shall prevent the authorization and creation of one or | ||
more programs for the issuance of commercial paper before the date | ||
of an occurrence or series of occurrences that results in insured | ||
losses under Section 2210.072(a). | ||
SECTION 22. Section 2210.613, Insurance Code, is amended to | ||
read as follows: | ||
Sec. 2210.613. PAYMENT OF CLASS 2 PUBLIC SECURITIES. (a) | ||
The association shall pay Class 2 public securities issued under | ||
Section 2210.073 from: | ||
(1) net premium and other revenue; and | ||
(2) if net premium and other revenue are not | ||
sufficient to pay the securities, a catastrophe area premium | ||
surcharge collected in accordance with this section. | ||
(b) On approval by the commissioner, the association and | ||
each insurer that provides insurance in a catastrophe area shall | ||
assess, as provided by this section, a premium surcharge to each | ||
policyholder of a policy described by Subsection (c). The premium | ||
surcharge must be set in an amount sufficient to pay, for the | ||
duration of the issued public securities, all debt service not | ||
already covered by available funds and all related expenses on the | ||
public securities [ |
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(c) The premium surcharge under this section [ |
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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 and each property and casualty insurance | ||
policy, including an automobile insurance policy, issued for | ||
automobiles and other property located in the catastrophe area. | ||
The [ |
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(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. | ||
(d) A premium surcharge under this section [ |
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is a separate charge in addition to the premiums collected and is | ||
not subject to premium tax or commissions. Failure by a | ||
policyholder to pay the surcharge constitutes failure to pay | ||
premium for purposes of policy cancellation. | ||
SECTION 23. Section 2210.6135, Insurance Code, is amended | ||
to read as follows: | ||
Sec. 2210.6135. PAYMENT OF CLASS 3 PUBLIC SECURITIES. (a) | ||
The association shall pay Class 3 public securities issued under | ||
Section 2210.074 from: | ||
(1) net premium and other revenue; and | ||
(2) if net premium and other revenue are not | ||
sufficient to pay the securities, a statewide premium surcharge | ||
collected in accordance with this section. | ||
(b) On approval of the commissioner, the association and | ||
each insurer that provides insurance in this state shall assess, as | ||
provided by this section, a premium surcharge to each policyholder | ||
of a policy described by Subsection (d). Except as provided by | ||
Subsection (c), the premium surcharge must be set in an amount | ||
sufficient to pay, for the duration of the issued public | ||
securities, all debt service not already covered by available funds | ||
and all related expenses on the public securities. | ||
(c) The amount of the surcharge assessed under Subsection | ||
(b) may not exceed one percent of the premium charged for the | ||
policyholder's policy described by Subsection (d). | ||
(d) The premium surcharge under this section shall be | ||
assessed on all policyholders of policies that cover insured | ||
property located in this state, including automobiles principally | ||
garaged in this state, written under the following lines of | ||
insurance: | ||
(1) fire and allied lines; | ||
(2) farm and ranch owners; | ||
(3) residential property insurance; and | ||
(4) private passenger automobile liability and | ||
physical damage insurance. | ||
(e) A premium surcharge under this section is a separate | ||
charge in addition to the premiums collected and is not subject to | ||
premium tax or commissions. Failure by a policyholder to pay the | ||
surcharge constitutes failure to pay premium for purposes of policy | ||
cancellation [ |
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SECTION 24. Section 2210.616(a), Insurance Code, is amended | ||
to read as follows: | ||
(a) The state pledges for the benefit and protection of | ||
financing parties, the board, and the association that the state | ||
will not take or permit any action that would: | ||
(1) impair the collection of [ |
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premium surcharges or the deposit of those funds into the Class 1 | ||
public security [ |
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security [ |
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security trust fund; | ||
(2) reduce, alter, or impair the [ |
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financing parties until the principal, interest, and premium, and | ||
any other charges incurred and contracts to be performed in | ||
connection with the related public securities, have been paid and | ||
performed in full; or | ||
(3) in any way impair the rights and remedies of the | ||
public security owners until the public securities are fully | ||
discharged. | ||
SECTION 25. Section 2210.6165, Insurance Code, is amended | ||
to read as follows: | ||
Sec. 2210.6165. PROPERTY RIGHTS. If public securities | ||
issued under this subchapter are outstanding, the rights and | ||
interests of the association, a successor to the association, any | ||
member of the association, or any member of the Texas FAIR Plan | ||
Association, including the right to impose, collect, and receive a | ||
premium surcharge [ |
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subchapter, are only contract rights until those revenues are first | ||
pledged for the repayment of the association's public security | ||
obligations as provided by Section 2210.609. | ||
SECTION 26. 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 insurance and may submit comments | ||
to the commissioner on the proposed rules; | ||
(2) review the reports required by Section | ||
2210.211(i); | ||
(3) monitor windstorm insurance in this state, | ||
including: | ||
(A) the adequacy of rates; | ||
(B) the operation of the association; and | ||
(C) the availability of coverage; [ |
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(4) monitor the activities of the association under | ||
Section 2210.211, including: | ||
(A) the performance of the association's | ||
operations; | ||
(B) the association's progress toward meeting | ||
the requirements of Section 2210.211; and | ||
(C) the extent of voluntary market participation | ||
in coastal and historically underserved areas in this state; and | ||
(5) [ |
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proposed by the department or the association. | ||
SECTION 27. The following provisions of Chapter 2210, | ||
Insurance Code, are repealed: | ||
(1) Section 2210.075; | ||
(2) Sections 2210.102(g) and (h); | ||
(3) Sections 2210.602(5-a), (6-b), (6-c), and (10); | ||
(4) Section 2210.605(c); and | ||
(5) Section 2210.6136. | ||
SECTION 28. (a) The board of directors of the Texas | ||
Windstorm Insurance Association established under Section | ||
2210.102, Insurance Code, as that section existed before amendment | ||
by this Act, is abolished effective November 1, 2015. | ||
(b) The governor shall appoint the members of the board of | ||
directors of the Texas Windstorm Insurance Association under | ||
Section 2210.102, Insurance Code, as amended by this Act, effective | ||
November 1, 2015. The initial directors shall draw lots to achieve | ||
staggered terms, with three of the directors serving one-year | ||
terms, three of the directors serving two-year terms, and three of | ||
the directors serving three-year terms. | ||
(c) The term of a person who is serving as a member of the | ||
board of directors of the Texas Windstorm Insurance Association | ||
immediately before the abolition of that board under Subsection (a) | ||
of this section expires on November 1, 2015. Such a person is | ||
eligible for appointment by the governor to the new board of | ||
directors of the Texas Windstorm Insurance Association under | ||
Section 2210.102, Insurance Code, as amended by this Act. | ||
(d) Notwithstanding Section 2210.4521, Insurance Code, as | ||
added by this Act, or Subsection (e) of this section, beginning on | ||
the effective date of this Act and continuing until December 31, | ||
2015, the Texas Windstorm Insurance Association shall deposit 30 | ||
percent of its earned premium into the trust fund described by that | ||
section. Not later than February 1, 2016, the association shall | ||
direct the Texas Treasury Safekeeping Trust Company to deposit all | ||
amounts deposited in the trust fund during the 2015 calendar year, | ||
and interest earned on those funds, into the catastrophe reserve | ||
trust fund as described by that section. | ||
(e) Section 2210.4521, Insurance Code, as added by this Act, | ||
applies to all Texas Windstorm Insurance Association premium earned | ||
on and after January 1, 2016. | ||
(f) Notwithstanding Subsection (d) of this section and | ||
Section 2210.0715, Insurance Code, as added by this Act, amounts | ||
collected under Section 2210.4521, Insurance Code, as added by this | ||
Act, may not be used to pay for a covered insured association loss | ||
incurred before June 1, 2015. | ||
(g) Section 2210.5725, Insurance Code, as added by this Act, | ||
applies only to adjustment of a claim made on or after the effective | ||
date of this Act. | ||
(h) It is the intent of the legislature that each member of | ||
the legislative oversight board appointed under Section 2210.652, | ||
Insurance Code, and serving on the effective date of this Act | ||
continues to serve after the effective date of this Act until a | ||
successor is appointed under that section. | ||
SECTION 29. This Act takes effect immediately if it | ||
receives a vote of two-thirds of all the members elected to each | ||
house, as provided by Section 39, Article III, Texas Constitution. | ||
If this Act does not receive the vote necessary for immediate | ||
effect, this Act takes effect September 1, 2015. |