Enrolled Bill Summary

House Bill 3689 amends the Insurance Code and Government Code to replace the existing method of funding excess losses and operating expenses of the Texas Windstorm Insurance Association (TWIA), which provides for the use of three classes of public securities and member assessments after TWIA reserves and the catastrophe reserve trust fund are depleted, with a new method under which TWIA must pay excess losses and operating expenses from the following sources, in order:

• TWIA reserves and amounts in the catastrophe reserve trust fund;
• state-funded financing arrangements of not more than $1 billion; and
• member assessments not to exceed $1 billion for the respective catastrophe year.

The bill maintains the authorization for a TWIA member to purchase reinsurance to cover an assessment for which the member would otherwise be liable. The new funding method applies only to excess losses and operating expenses incurred after December 31, 2025, but the bill authorizes TWIA to pay excess losses and operating expenses incurred before January 1, 2026, using state-funded financing arrangements as an alternative to public securities. Effective September 1, 2027, the bill repeals provisions governing the existing funding method and the public securities program.

House Bill 3689 authorizes TWIA to enter into a financing arrangement with the state before a catastrophic event, for not more than $500 million, and after a catastrophic event that depletes the catastrophe reserve fund, for not more than $1 billion, and requires the comptroller of public accounts to invest certain economic stabilization fund (ESF) balances to provide such an arrangement, provided that ESF balances are above the sufficient balance at the time of investment. The bill caps at $1 billion the amount of the ESF balance that may be invested for this purpose per catastrophe year and caps at $2 billion the aggregate amount of outstanding pre‑event and post-event financing. The bill sets out provisions governing such an arrangement and investment, including provisions relating to a request by TWIA to enter into an arrangement, deposit and use of arrangement proceeds, repayment of arrangement obligations, the arrangement's interest rate and maturity, and the comptroller's management of the investment portfolio.

House Bill 3689 provides for the authority of the commissioner of insurance, in consultation with TWIA's board of directors and the comptroller, to order a catastrophe surcharge to be assessed by insurers on all policyholders of applicable property insurance policies for the purpose of repaying an obligation to the state under a catastrophe financing arrangement and associated administrative expenses. The bill sets out provisions governing such a surcharge, including provisions relating to the amount of the surcharge, the deposit of the surcharge proceeds, and a required disclosure of the surcharge in the documents attached to an applicable insurance policy. The bill requires the commissioner to provide an annual report to the governor, lieutenant governor, and speaker of the house of representatives that includes the amount available in the catastrophe reserve trust fund and information regarding the current financial condition of TWIA.

House Bill 3689 reduces TWIA's minimum total available loss funding to an amount not less than the probable maximum loss for a catastrophe year with a probability of one in 50, rather than a probability of one in 100 as in previous law. The bill authorizes the commissioner to adopt a method or approve TWIA's method of determining the probability of one in 50 for TWIA risks and requires the commissioner to provide any adopted or approved method to TWIA on or before February 1 of each year.

House Bill 3689 authorizes TWIA to include the amounts held in the catastrophe reserve trust fund as an admitted asset in the financial statements of TWIA. The bill authorizes the comptroller and TWIA's board of directors to recommend investments to protect the trust fund and create investment income.

Except as otherwise provided, House Bill 3689 takes effect September 1, 2025.