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Senate Bill 900 |
Senate Author: Taylor, Larry et al. |
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Effective: 9-1-15 |
House Sponsor: Bonnen, Greg |
Senate Bill 900 amends the Insurance Code to address issues relating to the operations, governance, and financial structure of the Texas Windstorm Insurance Association (TWIA).
With respect to TWIA's financial structure, Senate Bill 900 introduces Class 1, Class 2, and Class 3 member assessments to the prescribed sequence for paying TWIA's losses in excess of premium and other TWIA revenue so that the assessments are made after the issuance of Class 1, Class 2, and Class 3 public securities, respectively. The bill also lowers the caps on amounts of public security issuances and provides for the payment of public securities through catastrophe area premium surcharges assessed on TWIA policyholders if net premium and other revenue are not sufficient to pay the securities. The bill also provides for the assessment of premium surcharges on policyholders of property and casualty insurance policies that cover insured property located in a catastrophe area, but only under limited circumstances as a contingent source of payment for Class 2 and Class 3 public securities.
In addition, Senate Bill 900 authorizes use of the catastrophe reserve trust fund (CRTF) for purchasing reinsurance or using alternative risk financing mechanisms, provides for the investment of CRTF balances, and requires TWIA to maintain total available loss funding in an amount sufficient to cover the probable maximum loss for a catastrophe year with a probability of one in 100. If necessary, the required funding level must be achieved through the purchase of reinsurance or the use of alternative financing mechanisms, or both, to operate in addition to or in concert with the CRTF, public securities, financial instruments, and assessments.
Among other provisions, Senate Bill 900 also requires the Texas Department of Insurance to biennially conduct a study of market incentives to promote participation in the voluntary windstorm and hail insurance market in the seacoast territory; authorizes the commissioner of insurance to contract with an administrator to manage TWIA and administer TWIA's plan of operation; authorizes TWIA to temporarily insure certain structures while an applicant seeks to secure a certificate of compliance for the structure; requires TWIA to administer, subject to commissioner approval, a depopulation program that encourages the transfer of TWIA policies to insurers through the voluntary market or assumption reinsurance; and revises the composition of TWIA's board of directors. Effective October 1, 2015, the bill abolishes TWIA's sitting board of directors and requires the commissioner to appoint a new board in accordance with the revised composition.