BILL ANALYSIS Insurance Committee C.S.H.B. 2676 By: T. Hunter 04-26-95 Committee Report (Substituted) BACKGROUND The Texas Catastrophe Property Insurance Association Act, (Article 21.49, Insurance Code) establishes a mechanism for providing coverage for windstorm and hail insurance in designated catastrophe areas. Article 21.49 of the Insurance Code is the statute governing the operation of the Texas Catastrophe Property Insurance Association (TCPIA) and its authority to issue windstorm and hail insurance in designated catastrophe areas. PURPOSE As substituted, H.B. 2676 would amend Article 21.49 of the Insurance Code to clarify the adjustment of the maximum limits of liability that can be offered through the TCPIA. Additionally, this bill would allow the Commissioner of Insurance to designate a city or county, in whole or in part, as a catastrophe area if a substantial number of owners of insurable properties are unable to obtain windstorm and hail insurance. Finally, as substituted, the bill clarifies the replacement cost coverage available through the TCPIA so that TCPIA replacement cost coverage is consistent with forms promulgated by the Commissioner of Insurance for other residential property insurers. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Article 21.49, §8D, to allow the TCPIA board of directors to adjust the maximum limits of liability that can be purchased through TCPIA annually. Present law requires the Commissioner make this adjustment as part of an annual rate hearing. The maximum limits must be adjusted not later than September 1st of each year and adjusted for inflation reflecting any changes in the BOECKH Index. Additionally, the board of directors may make additional increases in the limits of liability as necessary for the purposes of the Act. Finally, any adjustment made by the board of directors must be filed with the Commissioner of Insurance who has the authority to disapprove such calculations by the TCPIA board. SECTION 2. Amends Article 21.49, §3(h), by allowing the Commissioner of Insurance to designate a city, "in whole or in part," or a county, "in whole or in part," as a catastrophe area. Under current law, the Commissioner may only designate an entire city or county as a catastrophe area. The standard is that a substantial number of owners of insurable property have been unable to obtain windstorm and hail insurance in the voluntary market. This section would allow the Commissioner to designate part of the city or part of the county as a catastrophe area. SECTION 3. Amends Article 21.49, §8A, dealing with replacement cost coverage. Replacement cost coverage in the statute provides certain limitations that are not consistent with the limitations set forth in forms promulgated by the Commissioner for residential property insurers. This amendment conforms the TCPIA replacement cost coverage to that coverage available in the Texas Personal Lines Manual and consistent with forms promulgated by the Commissioner for residential property insurers. SECTION 4. Effective Date SECTION 5. Emergency Clause COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute bill differs from the original bill by clarifying SECTION 1 to require the board of directors of TCPIA to make a filing of its adjusted limits of liability with the Commissioner of Insurance and provides that the filing is deemed approved unless disapproved by the Commissioner within 30 days. The substitute bill also adds an amendment in SECTION 2 allowing the Commissioner to designate a city or county, in whole or in part. Finally, the substitute bill adds a SECTION 3 dealing with replacement cost coverage that allows TCPIA to issue replacement cost coverage on forms consistent with forms promulgated by the Commissioner for residential property insurers. SUMMARY OF COMMITTEE ACTION In accordance with House rules, H.B. 2676 was heard in a public hearing on April 19, 1995. There being a quorum present the Chair announced at the request of the author, H.B. 2676 by Rep. Hunter be left as pending business before the Committee. There being a quorum present on April 26, 1995, the Chair laid out H.B. 2676 as pending business and recognized Counts who laid out a substitute to H.B. 2676. The Chair recognized Representative Shields who offered an amendment to the substitute to H.B. 2676. The Chair heard no objections and the amendment was adopted. The Chair recognized Representative Shields who moved the Committee redraft a substitute to H.B. 2676 incorporating the adopted amendment. The Chair heard no objections and the motion to redraft a substitute to H.B. 2676 was adopted. The Chair recognized Rep. Shields who moved the Committee adopt the redrafted substitute of H.B. 2676. The Chair heard no objections and the motion was adopted. The Chair recognized Representative Shields who moved the Committee report the redrafted substitute of H.B. 2676 to the full House with the recommendation that it do pass, be printed, and sent to the Committee on Local and Consent. Representative Counts seconded the motion and the motion prevailed by the following vote: AYES (7); NAYES (0); ABSENT (2); PNV (0).