BILL ANALYSIS H.B. 2593 By: Eiland (Henderson) Economic Development 05-25-95 Senate Committee Report (Unamended) BACKGROUND Under current law, the commissioner of insurance has the duty to promulgate the manual rate for commercial risks and classes of risks written by the Texas Catastrophe Property Insurance Association. The association is foreclosed from using the file and use system available to other commercial property insurers who compete in the marketplace. Also, the rates for commercial windstorm and hail insurance written by the association must be 90 percent of the manual rates for extended coverage for commercial risks. PURPOSE As proposed, H.B. 2593 redefines "catastrophe area" and provides an alternate process for ratemaking for windstorm and hail insurance. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not grant any additional rulemaking authority to a state officer, institution, or agency. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 3(h), Article 21.49, Insurance Code (Texas Catastrophe Property Insurance Pool Act), to redefine "catastrophe area" to include a city or part of a city or a county or a part of a county in which it may be determined by the commissioner of insurance (commissioner), rather than the State Board of Insurance (board), that windstorm and hail insurance is not available to the owner of insurable property within that area. Makes conforming changes. SECTION 2. Amends Section 8(h), Article 21.49, Insurance Code, as follows: (1) Makes a conforming change. (2) Deletes the requirement that only the rates for noncommercial windstorm and hail insurance written by the Texas Catastrophe Property Insurance Association (association) before December 31, 1995, be 90 percent of the modified extended coverage rates. Makes conforming changes. (3) Deletes the requirement that the rates for noncommercial windstorm and hail insurance written by the association after December 31, 1995, be 90 percent of the manual rate for monoline extended coverage promulgated by the board for noncommercial risks under Chapter 5C, Insurance Code. Requires the association not later than August 1 of each year to file with the Department of Insurance (department) for approval by the commissioner a manual rate for commercial risks and classes of risks written by the association developed in accordance with Chapter 5C, Insurance Code, which is applicable only to the extent consistent with this article. Prohibits the association from making such a filing more than one time in any 12-month period. Requires the rate for commercial windstorm and hail insurance written by the association to be 90 percent of the rate for extended coverage for commercial risks as developed in accordance with Chapter 5C, Insurance Code, to the extent consistent with this article. Provides that Article 1.33B of this code does not apply to a filing made under this subdivision and Subdivisions (4)-(10) of this subsection, or a department action with respect to the filing. Deletes the provision that rates for commercial windstorm and hail insurance written by the association shall be 90 percent of the manual rates for extended coverage promulgated by the board for commercial rates under Chapter 5C, Insurance Code. (4) Requires the commissioner to provide all interested persons an opportunity to review the filing, obtain copies of the filing on payment of any legally required copying cost, and submit to the commissioner written comments or information related to the filing. (5) Requires the commissioner to schedule an open meeting no later than 45 days after the date on which the department receives the filing at which interested persons may present comments relating to the filing. Subjects an open meeting under this subdivision to Chapter 551, Government Code, but is not a contested case hearing under Chapter 2001, Government Code. (6) Requires the department to file with the Texas Register notice that a filing has been made under Subdivision (3) of this subsection no later than seven days after the date the filing is received by the department. Sets forth information the notice must include. (7) Requires the commissioner, after the conclusion of the open meeting, to approve or disapprove or modify the filing in writing on or before November 1 of the year in which the filing is made or the filing is deemed approved. Requires the commissioner, if the commissioner disapproves a filing, to state in writing the reasons for the disapproval and the criteria to be met by the association to obtain approval. Authorizes the association to file with the commissioner, no later than 10 days after the date on which the association receives the commissioner's written disapproval, an amended filing bringing the filing into conformity with all criteria stated in the commissioner's written disapproval. (8) Requires the commissioner, before approving or disapproving an amended filing, to provide all interested persons an opportunity to review the amended filing, obtain copies of the amended filing on payment of any legally required copying costs, and submit to the commissioner comments or information related to the amended filing in the manner provided by Subdivision (4) of this subdivision, and may hold a hearing not later than 20 days after the date on which the department receives the amended filing in the manner provided by Subdivision (5) of this subsection. Requires the commissioner, no later than 10 days after the date on which the hearing on the amended filing is concluded, to approve or disapprove the amended filing. Requires the commissioner, within 30 days after the amended filing is received, to approve or disapprove an amended filing or it is deemed approved. Provides that the requirements imposed under Subdivisions (6 and (7) of this subsection apply to a hearing conducted under this subdivision. (9) Authorizes the commissioner, in conjunction with the review of a filing or amended filing, to request the association to provide additional supporting information relating to the filing or amended filing, and any interested person may file a request with the commissioner for additional supporting information relating to the filing or amended filing. Requires a request under this subdivision to be reasonable and directly related to the filing. Requires the commissioner to submit to the association all request for additional supporting information made under this subdivision for the commissioner's use and the use of any interested person. Requires the association to provide the information to the commissioner no later than five days after the request for additional supporting information is delivered to the association. Requires the department to notify an interested person who has requested additional information of the availability of the information no later than one business day after the date on which the commissioner receives the information from the association. (10) Prohibits a filing made under this subsection from reflecting an annual premium rate change that is more than 15 percent of the rate for commercial windstorm and hail insurance in each rate classification in effect on September 1, 1995. Provides that this subdivision expires January 1, 2001, provided however, that the commissioner may, after notice and hearing, suspend this subdivision upon a finding that a catastrophe loss or series of occurrences resulting in losses in the catastrophe area justify a need to assure rate adequacy in the catastrophe area and also justify a need to assure availability of insurance outside the catastrophe area. (11)-(12) Make conforming changes. (13) Created from existing text. SECTION 3. Requires the commissioner, no later than December 31, 1995, to submit to the governor, lieutenant governor, and speaker of the house of representatives a report containing the commissioner's conclusions and recommendations for further action regarding the treatment of claims resulting from a significant natural catastrophe. Sets forth provisions the report must include. SECTION 4. Effective date: September 1, 1995. Makes application of this Act prospective beginning January 1, 1996. SECTION 5. Emergency clause.