H.B. No. 998

AN ACT

relating to the provision of property owners' association insurance by the FAIR Plan Association in certain areas.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 2211.001, Insurance Code, is amended by adding Subdivision (6-a) to read as follows:

(6-a) "Property owners' association insurance" means property and liability insurance covering:

(A) common areas and facilities of a homeowners' association; or

(B) common elements of a condominium owners' association.

SECTION 2. Section 2211.051, Insurance Code, is amended to read as follows:

Sec. 2211.051. ESTABLISHMENT OF FAIR PLAN. (a) The commissioner may establish a Fair Access to Insurance Requirements Plan to deliver residential property insurance to residents of this state in underserved areas if the commissioner determines, after a public hearing, that:

(1) in all or any part of the state, residential property insurance is not reasonably available in the voluntary market to a substantial number of insurable risks; or

(2) at least 25 percent of the applicants to the residential property market assistance program who are qualified under that program's plan of operation have not been placed with an insurer in the preceding six months.

(b) The commissioner may include in the plan established under Subsection (a) the delivery of property owners' association insurance in underserved areas as provided by Section 2211.1515 if the commissioner determines, after notice and a hearing, that in all or any part of the area designated under Section 2211.1515(a), property owners' association insurance is not reasonably available in the voluntary market to a substantial number of insurable risks.

SECTION 3. Section 2211.054, Insurance Code, is amended to read as follows:

Sec. 2211.054. CONTENTS OF PLAN OF OPERATION. The plan of operation must:

(1) provide for a nonprofit association to issue residential property insurance and, if applicable, property owners' association insurance under this chapter and distribute the losses and expenses in writing that insurance in this state;

(2) provide that all insurers that write residential property insurance shall participate in the association in accordance with Sections 2211.101(b) and (c);

(3) provide that a participating insurer is entitled to receive credit in accordance with Section 2211.101(d);

(4) provide for the immediate binding of eligible risks;

(5) provide for the use of premium installment payment plans, adequate marketing, and service facilities;

(6) provide for the establishment of reasonable service standards;

(7) provide procedures for efficient, economical, fair, and nondiscriminatory administration of the association;

(8) provide procedures for determining the net level of participation required for each insurer in the association;

(9) provide for the use of deductibles and other underwriting devices;

(10) provide for assessment of all members in amounts sufficient to operate the association;

(11) establish maximum limits of liability to be placed through the program;

(12) establish commissions to be paid to the insurance agents submitting applications;

(13) provide that the association issue policies in the association's own name;

(14) provide reasonable underwriting standards for determining insurability of a risk;

(15) provide procedures for the association to assume and cede reinsurance; and

(16) provide any other procedure or operational matter the governing committee or the commissioner considers necessary.

SECTION 4. Subchapter D, Chapter 2211, Insurance Code, is amended by adding Section 2211.1515 to read as follows:

Sec. 2211.1515. MANDATORY PROPERTY OWNERS' ASSOCIATION POLICIES IN CERTAIN AREAS. (a) This section applies only to the area designated by the commissioner by rule. In determining the boundaries of the area, the commissioner shall:

(1) to the extent practicable, ensure the area is not more than 10 miles beyond the Texas Windstorm Insurance Association catastrophe area designated under Section 2210.005; and

(2) follow geographical features.

(b) If the commissioner makes the determination described by Section 2211.051(b), the association shall make property owners' association insurance available to each applicant in an underserved area of the area designated under Subsection (a) whose property is insurable in accordance with reasonable underwriting standards but who, after diligent efforts, is unable to obtain property owners' association insurance through the voluntary market, as evidenced by two declinations from insurers authorized to engage in the business of, and writing, property owners' association insurance in this state.

(c) If the area designated under Subsection (a) changes after the association issues a policy under Subsection (b), the policy is valid until renewal regardless of whether the insured property is located in the area designated under Subsection (a) after the change.

SECTION 5. Section 2211.153, Insurance Code, is amended to read as follows:

Sec. 2211.153. INSPECTION BUREAU. The association, with the approval of the commissioner, shall designate one or more organizations as the inspection bureau. The inspection bureau shall:

(1) make inspections to determine the condition of a property for which residential property insurance or property owners' association insurance is sought; and

(2) perform other duties authorized by the association or the commissioner.

SECTION 6. Section 2211.154(a), Insurance Code, is amended to read as follows:

(a) A person who has an insurable interest in real or tangible personal property at a fixed location in an underserved area and who, after diligent effort, is unable to obtain residential property insurance, or a homeowners' or condominium owners' association located in an underserved area as provided by Section 2211.1515 that, after diligent effort, is unable to obtain property owners' association insurance, as evidenced by two current declinations from insurers authorized to engage in the business of residential property insurance or property owners' association insurance, as applicable, in this state and actually writing residential property insurance or property owners' association insurance in this state, is entitled on application to the association to an inspection and evaluation of the property by representatives of the inspection bureau.

SECTION 7. Section 2211.155, Insurance Code, is amended to read as follows:

Sec. 2211.155. INSPECTION RESULTS; REINSPECTION. (a) If, after an inspection, the inspection bureau determines that [residential] property meets the underwriting standards established in the plan of operation, the applicant must be informed in writing of that determination and the association shall issue a policy or binder. If the [residential] property does not meet the underwriting standards, the applicant must be informed in writing of the reason for the failure of the [residential] property to meet the standards.

(b) If, at any time, an applicant whose [residential] property did not meet the underwriting standards makes improvements to the property or the property's condition that the applicant believes are sufficient to make the property meet the standards, an inspection bureau representative shall reinspect the property on request. In any case, the applicant is eligible for one reinspection on or before the 60th day after the date of the initial inspection.

(c) If, on reinspection, the [residential] property meets the underwriting standards, the applicant must be informed in writing of that fact and the association shall issue a policy or binder.

SECTION 8. Section 2211.201, Insurance Code, is amended to read as follows:

Sec. 2211.201. PURPOSE. The legislature finds that issuing public securities to provide a method to raise funds to provide residential property insurance and property owners' association insurance in this state through the association is to benefit the public and to further a public purpose.

SECTION 9. Notwithstanding the changes in law made by this Act to Chapter 2211, Insurance Code, the Fair Access to Insurance Requirements Plan is not required to provide property owners' association insurance under that chapter until September 1, 2024.

SECTION 10. This Act takes effect September 1, 2023.

______________________________ ______________________________

President of the Senate Speaker of the House

I certify that H.B. No. 998 was passed by the House on April 14, 2023, by the following vote: Yeas 139, Nays 4, 2 present, not voting.

______________________________ Chief Clerk of the House

I certify that H.B. No. 998 was passed by the Senate on May 4, 2023, by the following vote: Yeas 29, Nays 2.

______________________________ Secretary of the Senate APPROVED: _____________________

Date

_____________________

Governor