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A BILL TO BE ENTITLED
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AN ACT
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relating to the modernization of regulation of commercial property |
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and casualty insurance. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 2251.002, Insurance Code, is amended to |
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read as follows: |
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Section 2251.002. DEFINITIONS. In this chapter: |
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(1) "Commercial property insurance" means insurance |
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coverage against loss caused by or resulting from loss, damage, or |
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destruction of real or personal property provided through a |
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commercial property insurance policy. The term includes any |
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combination of: |
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(A) commercial fire or allied lines; |
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(B) commercial inland marine insurance; |
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(C) commercial crime coverage; |
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(D) boiler and machinery insurance other than |
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explosion; |
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(E) glass insurance provided as part of other |
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coverage; |
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(F) as authorized by commissioner rule, insurance |
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covering other perils or providing other coverages or other lines |
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of first party property insurance. |
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(1-a) "Disallowed expenses" includes: |
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(A) administrative expenses, other than |
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acquisition, loss control, and safety engineering expenses, that |
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exceed 110 percent of the industry median for those expenses; |
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(B) lobbying expenses; |
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(C) advertising expenses, other than for |
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advertising: |
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(i) directly related to the services or |
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products provided by the insurer; or |
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(ii) designed and directed at loss |
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prevention; |
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(D) amounts paid by an insurer: |
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(i) as damages in an action brought against |
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the insurer for bad faith, fraud, or any matters other than payment |
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under the insurance contract; or |
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(ii) as fees, fines, penalties, or exemplary |
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damages for a civil or criminal violation of law; |
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(E) contributions to: |
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(i) social, religious, political, or |
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fraternal organizations; or |
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(ii) organizations engaged in legislative |
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advocacy; |
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(F) except as authorized by commissioner rule, |
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fees and assessments paid to advisory organizations; |
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(G) any amount determined by the commissioner to |
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be excess premiums charged by the insurer; and |
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(H) any unreasonably incurred expenses, as |
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determined by the commissioner after notice and hearing. |
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(2) "Filer" means an insurer that files rates, |
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prospective loss costs, or supplementary rating of information |
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under this chapter. |
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(2-a) "Highly protected commercial property" is defined as |
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property that is judged to be subject to a much lower than normal |
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probability of loss by virtue of low hazard occupancy or property |
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type, superior construction, special fire protection equipment and |
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procedures, and management commitment to loss prevention. |
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(3) "Prospective loss cost" means that portion of a rate |
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that: |
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(A) does not include a provision for expenses or |
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profit, other than loss adjustment expenses; and |
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(B) is based on historical aggregate losses and |
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loss adjustment expenses projected by development to the ultimate |
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value of those losses and expenses and projected through trending |
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to a future point in time. |
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(4) "Rate" means the cost of insurance per exposure |
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unit, whether expressed as a single number or as a prospective loss |
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cost, adjusted to account for the treatment of expenses, profit, an |
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individual insurer variation in loss experience, before applying |
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individual risk variations based on loss or expense considerations. |
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(5) "Rating manual" means a publication or schedule |
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that lists rules, classifications, territory codes and |
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descriptions, rates, premiums, and other similar information used |
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by an insurer to determine the applicable premium charged an |
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insured. |
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(6) "Residential property insurance" means insurance |
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coverage against loss to real or tangible personal property at a |
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fixed location that is provided through a homeowners insurance |
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policy, including a tenants insurance policy, a condominium owners |
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insurance policy, or a residential fire and allied lines insurance |
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policy. |
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(7) "Supplementary rating information" means any |
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manual, rating schedule, plan of rules, rating rules, |
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classification systems, territory codes and descriptions, rating |
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plans, and other similar information used by the insurer to |
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determine the applicable premium for an insured. The term includes |
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factors and relativities, including increased limits factors, |
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classification relativities, deductible relativities, premium |
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discount, and other similar factors and rating plans such as |
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experience, schedule, and retrospective rating. |
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(8) "Supporting information" means: |
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(A) the experience and judgment of the filer and |
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the experience or information of other insurers or advisory |
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organizations on which the filer relied; |
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(B) the interpretation of any other information on |
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which the filer relied; |
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(C) a description of methods used in making a |
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rate; and |
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(D) any other information the department receives |
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from a filer as a response to a request under Section 38.001. |
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SECTION 2. Section 2251.003, Insurance Code, is amended to |
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read as follows: |
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Sec. 2251.003. APPLICABILITY OF CERTAIN SUBCHAPTERS. (a) |
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This subchapter and Subchapters B, C, and D apply to: |
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(1) an insurer to which Article 5.13 applies, other than |
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the Texas Windstorm Insurance Association, the FAIR Plan |
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Association, and the Texas Automobile Insurance Plan Association; |
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and |
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(2) except as provided by Subsection (c), a Lloyd's |
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plan, reciprocal or interinsurance exchange, and county mutual |
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insurance company with respect to the lines of insurance described |
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by Subsection (b). |
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(b) Except as provided by Subsection (d), this[This] |
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subchapter and Subchapters B, C, and D apply to all lines of the |
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following kinds of insurance written under an insurance policy or |
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contract issued by an insurer authorized to engage in the business |
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of insurance in this state: |
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(1) general liability insurance; |
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(2) residential and commercial property insurance, |
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including farm and ranch insurance and farm and ranch owners |
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insurance; |
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(3) personal and commercial casualty insurance, except |
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as provided by Section 2251.004; |
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(4) medical professional liability insurance; |
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(5) fidelity, guaranty, and surety bonds other than |
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criminal court appearance bonds; |
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(6) personal umbrella insurance; |
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(7) personal liability insurance; |
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(8) guaranteed auto protection (GAP) insurance; |
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(9) involuntary unemployment insurance; |
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(10) financial guaranty insurance; |
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(11) inland marine insurance; |
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(12) rain insurance; |
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(13) hail insurance on farm crops; |
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(14) personal and commercial automobile insurance; |
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(15) multi-peril insurance; and |
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(16) identity theft insurance issued under Chapter 706. |
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(c) Sections 2251.008, 2251.052, 2251.101, 2251.102, |
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2251.103, 2251.104, 2251.105, and 2251.107 do not apply to a |
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Lloyd's plan or a reciprocal or interinsurance exchange with |
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respect to commercial property insurance, inland marine insurance, |
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rain insurance, or hail insurance on farm crops. |
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(d) Except as provided by Subsection (e), Subchapter C does |
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not apply to all lines of the following kinds of insurance written |
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under a commercial insurance policy or contract issued by an |
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insurer authorized to engage in the business of insurance in this |
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state: |
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(1) surety bonds; |
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(2) fidelity bonds; |
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(3) commercial inland marine; |
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(4) boiler and machinery; |
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(5) environmental impairment or pollution liability; |
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(6) kidnap and ransom; |
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(7) political risk or expropriation; |
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(8) commercial excess liability or umbrella liability; |
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(9) directors' and officers' liability; |
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(10) fiduciary liability; |
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(11) employment practices liability; |
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(12) errors and omission and professional liability |
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(other than medical professional liability); |
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(13) media liability; |
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(14) product liability, product recall, or completed |
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operations; |
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(15) commercial cybersecurity, including first and |
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third party commercial lines coverage for losses arising out of or |
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relating to data privacy breaches, network security, computer |
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viruses, and similar exposures; |
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(16) highly protected commercial property; |
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(17) commercial flood insurance (other than National |
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Flood Insurance Program); |
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(18) any other commercial lines insurance coverage or |
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risk that the commissioner shall, by rule, exempt from rate filing |
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requirements under Subchapter C in order to promote enhanced |
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competition or to more effectively use the resources of the |
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department that might otherwise be used to review commercial lines |
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filings; and |
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(19) any combination of only the kinds of insurance in |
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this subsection. |
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(e) The commissioner may temporarily reinstate, for a period |
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of no longer than one year, the requirements for rate filings under |
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Subchapter C for a specific insurance coverage specified under |
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Subsection (d) if, after a hearing, the commissioner makes a |
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finding of fact that a reasonable degree of competition does not |
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exist for that specific type of insurance coverage. Such a finding |
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of fact by the commissioner must specify the relevant tests used to |
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determine whether a lack of a reasonable degree of competition |
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exists and the results thereof. In the absence of such specific |
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findings of fact by the commissioner, a competitive market is |
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presumed to exist. |
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(f) The commissioner may adopt reasonable and necessary rules |
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to implement this section. |
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(g) Section 2251.101 does not apply to rates for use with an |
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insured that has: |
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(1) total insured property values of $5 million or more; |
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(2) total annual gross revenues of $10 million or more; |
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or |
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(3) a total premium of $25,000 or more for property |
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insurance, $25,000 or more for general liability insurance, or |
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$50,000 or more for multiperil insurance. |
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SECTION 3. Section 2251.003(d), Insurance Code, as added by |
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this Act, applies only to an insurance policy delivered, issued for |
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delivery, or renewed on or after September 1, 2021. A policy |
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delivered, issued for delivery, or renewed before September 1, |
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2021, is governed by the law as it existed immediately before the |
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effective date of this Act, and that law is continued in effect for |
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that purpose. |
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SECTION 4. Section 2301.002, Insurance Code, is amended to |
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read as follows: |
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Sec. 2301.002. DEFINITIONS. In this subchapter: |
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(1) "Commercial property insurance" means insurance |
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|
coverage against loss caused by or resulting from loss, damage, or |
|
|
destruction of real or personal property provided through a |
|
|
commercial property insurance policy. The term includes any |
|
|
combination of: |
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|
(A) commercial fire or allied lines; |
|
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(B) commercial inland marine insurance; |
|
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(C) commercial crime coverage; |
|
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(D) boiler and machinery insurance other than |
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explosion; |
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(E) glass insurance provided as part of other |
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coverage; and |
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(F) as authorized by commissioner rule, insurance |
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covering other perils or providing other coverages or other lines |
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of first party property insurance. |
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(1-a) "Form" means an insurance policy form or a printed |
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endorsement form. |
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(1-b) "Highly protected commercial property" is defined as |
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property that is judged to be subject to a much lower than normal |
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probability of loss by virtue of low hazard occupancy or property |
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type, superior construction, special fire protection equipment and |
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procedures, and management commitment to loss prevention. |
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(2) "Residential property insurance" means insurance |
|
|
coverage against loss to real or tangible personal property at a |
|
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fixed location that is provided through a homeowners insurance |
|
|
policy, including a tenants insurance policy, a condominium owners |
|
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insurance policy, or a residential fire and allied lines insurance |
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policy. |
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(3) "Supporting information" means any information |
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required by the department to be filed. |
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SECTION 5. Section 2301.003, Insurance Code, is amended to |
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read as follows: |
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Sec. 2301.003. APPLICABILITY OF SUBCHAPTER. (a) This |
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subchapter applies to: |
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(1) an insurer to which Article 5.13 applies, other than |
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the Texas Windstorm Insurance Association, the FAIR Plan |
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Association, and the Texas Automobile Insurance Plan Association; |
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and |
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(2) except as provided by Subsections (c) and (d), a |
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Lloyd's plan, reciprocal or interinsurance exchange, and county |
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mutual insurance company with respect to the lines of insurance |
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described by Subsection (b). |
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(b) Except as provided in Subsection (e), this[This] |
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subchapter applies to all lines of the following kinds of insurance |
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written under an insurance policy or contract issued by an insurer |
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authorized to engage in the business of insurance in this state: |
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(1) general liability insurance; |
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(2) residential and commercial property insurance, |
|
|
including farm and ranch insurance and farm and ranch owners |
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insurance; |
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(3) personal and commercial casualty insurance, except |
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as provided by Section 2301.005; |
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(4) medical professional liability insurance; |
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(5) fidelity, guaranty, and surety bonds other than |
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criminal court appearance bonds; |
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(6) personal umbrella insurance; |
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(7) personal liability insurance; |
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(8) guaranteed auto protection (GAP) insurance; |
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(9) involuntary unemployment insurance; |
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(10) financial guaranty insurance; |
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(11) inland marine insurance; |
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(12) rain insurance; |
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(13) hail insurance on farm crops; |
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(14) personal and commercial automobile insurance; |
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(15) multi-peril insurance; and |
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(16) identity theft insurance issued under Chapter 706. |
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(c) Section 2301.009 does not apply to a Lloyd's plan or a |
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reciprocal or interinsurance exchange with respect to commercial |
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property insurance. |
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(d) This subchapter does not apply to a Lloyd's plan or |
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reciprocal or interinsurance exchange with respect to inland marine |
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insurance, rain insurance, or hail insurance on farm crops. |
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(e) Except as provided by Subsection (f), Sections 2301.006, |
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2301.007(a) and (b), and 2301.008 do not apply to all lines of the |
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following kinds of insurance written under a commercial insurance |
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policy or contract issued by an insurer authorized to engage in the |
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business of insurance in this state: |
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(1) surety bonds; |
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(2) fidelity bonds; |
|
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(3) commercial inland marine; |
|
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(4) boiler and machinery; |
|
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(5) environmental impairment or pollution liability; |
|
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(6) kidnap and ransom; |
|
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(7) political risk or expropriation; |
|
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(8) commercial excess liability or umbrella liability; |
|
|
(9) directors' and officers' liability; |
|
|
(10) fiduciary liability; |
|
|
(11) employment practices liability; |
|
|
(12) errors and omission and professional liability |
|
|
(other than medical professional liability); |
|
|
(13) media liability; |
|
|
(14) product liability, product recall, or completed |
|
|
operations; |
|
|
(15) cybersecurity, including first and third party |
|
|
commercial lines coverage for losses arising out of or relating to |
|
|
data privacy breaches, network security, computer viruses, and |
|
|
similar exposures; |
|
|
(16) highly protected commercial property; |
|
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(17) commercial flood insurance (other than National |
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Flood Insurance Program); |
|
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(18) any other commercial lines insurance coverage or |
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risk that the commissioner shall, by rule, exempt from policy form |
|
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filing requirements under this subchapter in order to promote |
|
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enhanced competition or to more effectively use the resources of |
|
|
the department that might otherwise be used to review commercial |
|
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lines filings; and |
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(19) any combination of only the kinds of insurance in |
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this subsection. |
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(f) The commissioner may temporarily reinstate, for a period |
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of no longer than one year, the requirements of sections 2301.006, |
|
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2301.007(a) and (b), and 2301.008 for a specific insurance coverage |
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specified under Subsection (e) if, after a hearing, the |
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commissioner makes a finding of fact that a reasonable degree of |
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competition does not exist for that specific type of insurance |
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coverage. Such a finding of fact by the commissioner must specify |
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the relevant tests used to determine whether a lack of a reasonable |
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degree of competition exists and the results thereof. In the |
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absence of such specific findings of fact by the commissioner, a |
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competitive market is presumed to exist. |
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(g) The commissioner may adopt reasonable and necessary rules |
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to implement this section. |
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SECTION 6. Section 981.004, Insurance Code, is amended to |
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read as follows: |
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Sec. 981.004. SURPLUS LINES INSURANCE AUTHORIZED. (a) An |
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eligible surplus lines insurer may provide surplus lines insurance |
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only if: |
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(1) the full amount of required insurance cannot be |
|
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obtained, after a diligent effort, from an insurer authorized to |
|
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write and actually writing that kind and class of insurance in this |
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state; |
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(2) the insurance is placed through a surplus lines |
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agent; and |
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(3) the insurer meets the eligibility requirements of |
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Subchapter B or B-1 as of the inception date and annual anniversary |
|
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date of each insurance contract, cover note, or other confirmation |
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of insurance. |
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(b) An eligible surplus lines insurer may provide surplus |
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lines insurance only in the amount that exceeds the amount of |
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insurance obtainable from authorized insurers. |
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(c) Subsection (a)(1) does not apply to insurance procured |
|
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for an exempt commercial purchaser if: |
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(1) the agent procuring or placing the insurance |
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discloses to the exempt commercial purchaser that: |
|
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(A) comparable insurance may be available from the |
|
|
admitted market that is subject to more regulatory oversight that |
|
|
the surplus lines market; and |
|
|
(B) a policy purchase in the admitted market may |
|
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provide greater protection than the surplus lines insurance policy; |
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and |
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(2) after receiving the notice described by Subdivision |
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|
(1), the exempt commercial purchaser requests in writing that the |
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agent procure the insurance from or place the insurance with an |
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eligible surplus lines insurer. |
|
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(d) Subsection (a)(1) does not apply to insurance procured |
|
|
for an industrial insured if: |
|
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(1) the agent procuring or placing the insurance |
|
|
discloses to the industrial insured that: |
|
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(A) comparable insurance may be available from the |
|
|
admitted market that is subject to more regulatory oversight than |
|
|
the surplus lines market; and |
|
|
(B) a policy purchased in the admitted market may |
|
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provide greater protection than the surplus lines insurance policy; |
|
|
(2) the surplus lines company offering the coverage has |
|
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a financial strength rating of A- or better from the A. M. Best |
|
|
Company; and |
|
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(3) after receiving the notice described by Subdivision |
|
|
(1), the industrial insured requests in writing that the agent |
|
|
procure the insurance from or place the insurance with an eligible |
|
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surplus lines insurer. |
|
|
(e) Notwithstanding Subsection (a)(1), the availability of |
|
|
windstorm and hail insurance from the Texas Windstorm Insurance |
|
|
Association does not preclude an eligible surplus lines insurer |
|
|
from providing windstorm and hail insurance under Subsection (a) or |
|
|
limiting the amount of insurance that may be provided under |
|
|
Subsection (b). |
|
|
(f) Except with respect to any line of insurance and during |
|
|
any period of time for which the commissioner has temporarily |
|
|
reinstated the requirements for rate and form filings under Sec. |
|
|
2251.003(e) and Sec. 2301.003(f), Subsection (a)(1) and Subsection |
|
|
(b) do not apply to insurance procured in all lines of the kinds of |
|
|
insurance described in Section 2251.003(d) and 2301.003(e) and |
|
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provided by an eligible surplus lines insurer. |
|
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SECTION 7. This Act takes effect September 1, 2021. |