By: Martin H.B. No. 1681
73R6161 DLF-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to windstorm insurance issued by the Texas Catastrophe
1-3 Property Insurance Association.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Sections 8(h) and (i), Article 21.49, Insurance
1-6 Code, are amended to read as follows:
1-7 (h) Rates, including extended coverage rates covering risks
1-8 or classes of risks written by the Association before December 31,
1-9 1995, may not exceed the highest rate within the flexibility band
1-10 relative to the applicable benchmark rates promulgated by the
1-11 Board under Subchapter M, Chapter 5, Insurance Code, for
1-12 noncommercial lines of insurance. Rates for noncommercial lines of
1-13 insurance written by the Association on or after December 31, 1995,
1-14 may not exceed the manual rate promulgated by the Board under
1-15 Subchapter C, Chapter 5, Insurance Code. Notwithstanding Article
1-16 5.13-2, Insurance Code, the Board shall promulgate a manual rate
1-17 for commercial risks and classes of risks written by the
1-18 Association in accordance with Subchapter C, Chapter 5, Insurance
1-19 Code. Article 5.13-2, Insurance Code, does not apply to the rates
1-20 of insurance written by the Association.
1-21 If valid flood or rising water insurance coverage exists and
1-22 is maintained on any risk being insured in the pool the State Board
1-23 of Insurance may provide for a rate and reduction in rate of
1-24 premium as may be appropriate.
2-1 The State Board of Insurance shall make provision by rule and
2-2 regulation requiring catastrophe reserves as part of the premium
2-3 received on risks or classes of risks located in a catastrophe area
2-4 and shall approve a catastrophe reinsurance pool or program that is
2-5 funded through the excess of premiums over losses in a calendar
2-6 year and may approve a catastrophe reinsurance pool funded through
2-7 assessments of members of the Association. The amount required to
2-8 be reserved for catastrophes (as such catastrophes are defined by
2-9 the Board) shall be that portion of the pure premium as is
2-10 actuarially made attributable, as ascertained by the Board, to
2-11 prospective catastrophic loss. The portion of the pure premium
2-12 attributable to prospective catastrophic loss shall not be income
2-13 and shall be unearned until the occurrence of an applicable
2-14 catastrophe as defined and shall be held in trust by the pool or
2-15 trustee of the pool until losses are paid therefrom under such
2-16 reasonable rules and regulations as the State Board of Insurance
2-17 shall prescribe or approve.
2-18 (i) The Board annually shall promulgate extended coverage
2-19 rates <based on sound actuarial principles>. Rates for windstorm
2-20 and hail insurance shall be 90 percent of the extended coverage
2-21 rates. Extended coverage rates shall be uniform throughout the
2-22 first tier coastal counties. The catastrophe element of extended
2-23 coverage rates shall be uniform throughout the seacoast territory
2-24 and shall be based on all monoline extended coverage loss
2-25 experience of all regulated insurers authorized to do business in
2-26 this state, including the Association, for property located in the
2-27 seacoast territory, using the most recent 30 years' experience
3-1 available. Surcharges collected in the past and used in the
3-2 development of current manual rates may not be excluded from future
3-3 rate development as long as those surcharges were collected during
3-4 the experience period used by the Board.
3-5 SECTION 2. Section 19, Article 21.49, Insurance Code, is
3-6 amended to read as follows:
3-7 Sec. 19. Payment of Losses Exceeding $100 Million in Year;
3-8 Premium Tax Credit. If, in any calendar year, an <In the event
3-9 any> occurrence or series of occurrences within the defined
3-10 catastrophe area results in insured losses of the association
3-11 totaling in excess of five percent of the total prospective
3-12 liability of the association, as determined by the board of
3-13 directors <$100 million within a single calendar year>, the
3-14 proportion of the total loss allocable to each insurer shall be
3-15 determined in the same manner as its participation in the
3-16 association has been determined for the year under Subsection (c)
3-17 of Section 5 of this article <the Texas Catastrophe Insurance Pool
3-18 Act, as amended,> and any insurer which has paid its share of total
3-19 losses exceeding that amount <$100 million> in a calendar year
3-20 shall be entitled to credit the amount of that excess share against
3-21 its premium tax under Article 4.10 of this code and its subsequent
3-22 amendments <Article 7064, Revised Civil Statutes of Texas, 1925, as
3-23 amended>. The tax credit herein authorized shall be allowed at a
3-24 rate not to exceed 10 <20> percent per year for 10 <five> or more
3-25 successive years following the year of payment of the claims. The
3-26 balance of payments paid by the insurer and not claimed as such tax
3-27 credit may be reflected in the books and records of the insurer as
4-1 an admitted asset of the insurer for all purposes, including
4-2 exhibition in annual statements pursuant to Article 6.12 of this
4-3 code and its subsequent amendments <Insurance Code>.
4-4 SECTION 3. Article 21.49, Insurance Code, is amended by
4-5 adding Sections 20 and 21 to read as follows:
4-6 Sec. 20. FUNDING FOR LOSSES CAUSED BY CERTAIN CATASTROPHIC
4-7 WINDSTORMS. (a) The board of directors of the association, with
4-8 the approval of the board, may issue revenue bonds in accordance
4-9 with Article 21.49A of this code and its subsequent amendments to
4-10 recoup a loss incurred as a result of a severe hurricane or other
4-11 windstorm in a first tier coastal county.
4-12 (b) The board may not approve the issuance of revenue bonds
4-13 under this section unless the board finds, after a hearing, that a
4-14 portion of a first tier coastal county has suffered insured losses
4-15 because of sustained wind forces of a least 130 miles per hour.
4-16 Sec. 21. REFERRALS PROHIBITED. An insurer or an agent of an
4-17 insurer may not refer to the association for coverage an applicant
4-18 for insurance or an insured whose policy has been cancelled or not
4-19 renewed.
4-20 SECTION 4. Subchapter E, Chapter 21, Insurance Code, is
4-21 amended by adding Article 21.49A to read as follows:
4-22 Art. 21.49A. REVENUE BONDS TO FUND CATASTROPHIC LOSSES OF
4-23 CATASTROPHE PROPERTY INSURANCE POOL
4-24 Sec. 1. DEFINITIONS. In this article:
4-25 (1) "Association" means the Texas Catastrophe Property
4-26 Insurance Association.
4-27 (2) "Authority" means the Texas Public Finance
5-1 Authority.
5-2 (3) "Bond resolution" means the resolution or order
5-3 authorizing the bonds to be issued under this article.
5-4 (4) "Seacoast territory" has the meaning assigned by
5-5 Section 3, Article 21.49, of this code and its subsequent
5-6 amendments.
5-7 Sec. 2. BONDS AUTHORIZED. On behalf of the association, the
5-8 Texas Public Finance Authority shall issue revenue bonds to recoup
5-9 losses incurred by the association as provided by Section 20,
5-10 Article 21.49, of this code and its subsequent amendments.
5-11 Sec. 3. APPLICABILITY OF OTHER STATUTES. The following Acts
5-12 and any subsequent amendments apply to bonds issued under this
5-13 article to the extent consistent with this article:
5-14 (1) the Texas Public Finance Authority Act (Article
5-15 601d, Vernon's Texas Civil Statutes);
5-16 (2) Chapter 656, Acts of the 68th Legislature, Regular
5-17 Session, 1983 (Article 717q, Vernon's Texas Civil Statutes);
5-18 (3) Chapter 3, Acts of the 61st Legislature, Regular
5-19 Session, 1969 (Article 717k-2, Vernon's Texas Civil Statutes);
5-20 (4) the Bond Procedures Act of 1981 (Article 717k-6,
5-21 Vernon's Texas Civil Statutes);
5-22 (5) Chapter 1078, Acts of the 70th Legislature,
5-23 Regular Session, 1987 (Article 717k-7, Vernon's Texas Civil
5-24 Statutes);
5-25 (6) Article 3, Chapter 53, Acts of the 70th
5-26 Legislature, 2nd Called Session, 1987 (Article 717k-8, Vernon's
5-27 Texas Civil Statutes);
6-1 (7) Article 717k-9, Revised Statutes; and
6-2 (8) Chapter 400, Acts of the 66th Legislature, 1979
6-3 (Article 717m-1, Vernon's Texas Civil Statutes).
6-4 Sec. 4. LIMITS. The authority may issue, on behalf of the
6-5 fund, bonds in a total amount not to exceed $300 million.
6-6 Sec. 5. CONDITIONS. (a) Bonds may be issued at public or
6-7 private sale.
6-8 (b) Bonds may mature not more than 20 years after the date
6-9 issued.
6-10 (c) Bonds must be issued in the name of the association.
6-11 Sec. 6. ADDITIONAL COVENANTS. In a bond resolution, the
6-12 board of directors of the authority may make additional covenants
6-13 with respect to the bonds and the designated income and receipts of
6-14 the fund pledged to their payment and may provide for the flow of
6-15 funds and the establishment, maintenance, and investment of funds
6-16 and accounts with respect to the bonds.
6-17 Sec. 7. SPECIAL ACCOUNTS. (a) A bond resolution may
6-18 establish special accounts in the fund including an interest and
6-19 sinking fund account, reserve account, and other accounts.
6-20 (b) The board of directors of the association shall
6-21 administer the accounts.
6-22 Sec. 8. SECURITY. (a) Bonds are payable only from the
6-23 recoupment fee established by Section 9 of this article.
6-24 (b) Bonds are obligations solely of the association. Bonds
6-25 do not create a pledging, giving, or lending of the faith, credit,
6-26 or taxing authority of this state.
6-27 (c) Each bond must include a statement that the state is not
7-1 obligated to pay any amount on the bond and that the faith, credit,
7-2 and taxing authority of this state are not pledged, given, or lent
7-3 to those payments.
7-4 (d) Each bond issued under this article must state on its
7-5 face that the bond is payable solely from the revenues pledged for
7-6 that purpose and that the bond does not and may not constitute a
7-7 legal or moral obligation of the state.
7-8 Sec. 9. RECOUPMENT FEE. (a) A recoupment fee shall be
7-9 collected on each policy of windstorm and hail insurance issued or
7-10 renewed by an insurer in the seacoast territory or by the
7-11 association.
7-12 (b) The recoupment fee shall be in an amount set by the
7-13 State Board of Insurance on the recommendation of the board of
7-14 directors of the association and must be in an amount sufficient to
7-15 pay all debt service on the bonds.
7-16 (c) An insurer shall pay the fee to the association as
7-17 required by the plan of operation of the association.
7-18 (d) An insurer and the association may pass the recoupment
7-19 fee through to each of their policyholders as a separate charge.
7-20 Sec. 10. TAX EXEMPT. The bonds issued under this article,
7-21 and any interest from the bonds, and all assets pledged to secure
7-22 the payment of the bonds are free from taxation by the state or a
7-23 political subdivision of this state.
7-24 Sec. 11. AUTHORIZED INVESTMENTS. The bonds issued under
7-25 this article constitute authorized investments under Article 2.10
7-26 and Subpart A, Part I, Article 3.39, of this code and any
7-27 subsequent amendments.
8-1 Sec. 12. STATE PLEDGE. The state pledges to and agrees with
8-2 the owners of any bonds issued in accordance with this article that
8-3 the state will not limit or alter the rights vested in the program
8-4 to fulfill the terms of any agreements made with the owners of the
8-5 bonds or in any way impair the rights and remedies of those owners
8-6 until the bonds, any premium or interest, and all costs and
8-7 expenses in connection with any action or proceeding by or on
8-8 behalf of those owners are fully met and discharged. The program
8-9 may include this pledge and agreement of the state in any agreement
8-10 with the owners of the bonds.
8-11 Sec. 13. ENFORCEMENT BY MANDAMUS. A writ of mandamus and
8-12 all other legal and equitable remedies are available to any party
8-13 at interest to require the fund and any other party to carry out
8-14 agreements and to perform functions and duties under this article,
8-15 the Texas Constitution, or a bond resolution.
8-16 SECTION 5. (a) Except as provided by this section, this Act
8-17 takes effect September 1, 1993.
8-18 (b) The change in law made by Section 1 of this Act applies
8-19 only to rates for coverage that is delivered, issued for delivery,
8-20 or renewed on or after January 1, 1994. Rates for coverage that is
8-21 delivered, issued for delivery, or renewed before January 1, 1994,
8-22 are governed by the law as it existed immediately before the
8-23 effective date of this Act, and that law is continued in effect for
8-24 that purpose.
8-25 (c) The change in law made by Section 2 of this Act applies
8-26 beginning tax year 1994.
8-27 (d) The board of directors of the Texas Catastrophe Property
9-1 Insurance Association may issue revenue bonds as provided by
9-2 Section 20, Article 21.49, Insurance Code, as added by this Act,
9-3 only for losses incurred as a result of a hurricane or windstorm
9-4 that occurs on or after June 1, 1993.
9-5 SECTION 6. The importance of this legislation and the
9-6 crowded condition of the calendars in both houses create an
9-7 emergency and an imperative public necessity that the
9-8 constitutional rule requiring bills to be read on three several
9-9 days in each house be suspended, and this rule is hereby suspended.