1-1 By: Eiland, et al. (Senate Sponsor - Patterson) H.B. No. 2593
1-2 (In the Senate - Received from the House May 11, 1995;
1-3 May 12, 1995, read first time and referred to Committee on Economic
1-4 Development; May 24, 1995, reported favorably by the following
1-5 vote: Yeas 8, Nays 0; May 24, 1995, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to rates for commercial windstorm and hail insurance
1-9 coverage through the Texas Catastrophe Property Insurance
1-10 Association.
1-11 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-12 SECTION 1. Section 3(h), Texas Catastrophe Property
1-13 Insurance Pool Act (Article 21.49, Insurance Code), is amended to
1-14 read as follows:
1-15 (h) "Catastrophe Area" means a city or a part of a city or a
1-16 county or a part of a county in which it may be determined by the
1-17 commissioner <Board>, after notice of not less than 10 days and a
1-18 hearing, that windstorm and hail insurance is not reasonably
1-19 available to a substantial number of owners of insurable property
1-20 within that <such> city or a part of that city or a county or a
1-21 part of that county, due to such insurable property being located
1-22 within a city or a part of that city or a county or a part of that
1-23 county that is subject to unusually frequent and severe damage
1-24 resulting from windstorms and/or hailstorms. Such designation
1-25 shall be revoked by the commissioner <Board> if the commissioner
1-26 <it> determines, after notice of not less than 10 days and a
1-27 hearing, that windstorm and hail insurance in such catastrophe area
1-28 is no longer reasonably unavailable to a substantial number of
1-29 owners of insurable property within such designated city or a part
1-30 of that city or county or a part of that county. If the
1-31 Association shall determine that windstorm and hail insurance is no
1-32 longer reasonably unavailable to a substantial number of owners of
1-33 insurable property in any designated catastrophe area or areas,
1-34 then the Association may request in writing that the commissioner
1-35 <Board> revoke the designation of any or all of such catastrophe
1-36 areas and, after notice of not less than 10 days and a hearing, but
1-37 within 30 days of such hearing, the commissioner <Board> shall
1-38 either approve or reject the Association's request and shall, if
1-39 such request be approved, revoke such designation or designations.
1-40 SECTION 2. Section 8(h), Texas Catastrophe Property
1-41 Insurance Pool Act (Article 21.49, Insurance Code), is amended to
1-42 read as follows:
1-43 (h)(1) Each extended coverage benchmark rate, flexibility
1-44 band, and promulgated rate established by the commissioner <Board>
1-45 in accordance with Chapter 5, Insurance Code, must be uniform
1-46 throughout the first tier of coastal counties.
1-47 (2) The rates for noncommercial windstorm and hail
1-48 insurance written by the association <before December 31, 1995,>
1-49 shall be 90 percent of the modified extended coverage rates. For
1-50 purposes of this section, the modified extended coverage rate is
1-51 the greater of the upper flexibility band for extended coverage
1-52 established by the commissioner <board> under Article 5.101 of this
1-53 code or 25 percent above the extended coverage benchmark rate
1-54 established by the commissioner <board> under that article.
1-55 (3) Not later than August 1 of each year, the
1-56 Association <The rates for noncommercial windstorm and hail
1-57 insurance written by the association after December 31, 1995, shall
1-58 be 90 percent of the manual rate for monoline extended coverage
1-59 promulgated by the Board for noncommercial risks under Subchapter
1-60 C, Chapter 5, Insurance Code. Notwithstanding Article 5.13-2,
1-61 Insurance Code, the Board> shall file with the department for
1-62 approval by the commissioner <promulgate> a manual rate for
1-63 commercial risks and classes of risks written by the Association
1-64 developed in accordance with Subchapter C, Chapter 5, Insurance
1-65 Code, which is applicable only to the extent consistent with this
1-66 article. The Association may not make such a filing more than one
1-67 time in any 12-month period. The rate for commercial windstorm and
1-68 hail insurance written by the Association shall be 90 percent of
2-1 the rate for extended coverage for commercial risks as developed in
2-2 accordance with Subchapter C, Chapter 5, Insurance Code, to the
2-3 extent consistent with this article. Article 5.13-2, Insurance
2-4 Code, does not apply to the rates of insurance written by the
2-5 Association. Article 1.33B of this code does not apply to a filing
2-6 made under this subdivision and Subdivisions (4)-(10) of this
2-7 subsection, or a department action with respect to the filing.
2-8 <The rates for commercial windstorm and hail insurance written by
2-9 the Association shall be 90 percent of the manual rates for
2-10 extended coverage promulgated by the Board for commercial risks
2-11 under Subchapter C, Chapter 5, Insurance Code.>
2-12 (4) Before approving or disapproving a filing, or
2-13 modifying a filing, the commissioner shall provide all interested
2-14 persons a reasonable opportunity to review the filing, obtain
2-15 copies of the filing on payment of any legally required copying
2-16 cost, and submit to the commissioner written comments or
2-17 information related to the filing.
2-18 (5) The commissioner shall schedule an open meeting
2-19 not later than the 45th day after the date on which the department
2-20 receives the filing at which interested persons may present written
2-21 or oral comments relating to the filing. An open meeting under
2-22 this subdivision is subject to Chapter 551, Government Code, but is
2-23 not a contested case hearing under Chapter 2001, Government Code.
2-24 (6) The department shall file with the Texas Register
2-25 notice that a filing has been made under Subdivision (3) of this
2-26 subsection not later than the seventh day after the date the filing
2-27 is received by the department. The notice must include information
2-28 relating to:
2-29 (A) the availability of the filing for public
2-30 inspection at the department during regular business hours and the
2-31 procedures for obtaining copies of the filing;
2-32 (B) procedures for making written comments
2-33 related to the filing; and
2-34 (C) the time, place, and date of the open
2-35 meeting scheduled under Subdivision (5) of this subsection at which
2-36 an interested person may submit either written or oral comments
2-37 relating to the filing.
2-38 (7) After the conclusion of the open meeting, the
2-39 commissioner shall approve or disapprove or modify the filing in
2-40 writing on or before November 1 of the year in which the filing is
2-41 made or the filing is deemed approved. If the commissioner
2-42 disapproves a filing, the commissioner shall state in writing the
2-43 reasons for the disapproval and the criteria to be met by the
2-44 Association to obtain approval. The Association may file with the
2-45 commissioner, not later than ten (10) days after the date on which
2-46 the Association receives the commissioner's written disapproval, an
2-47 amended filing bringing the filing into conformity with all
2-48 criteria stated in the commissioner's written disapproval.
2-49 (8) Before approving or disapproving an amended
2-50 filing, the commissioner shall provide all interested persons a
2-51 reasonable opportunity to review the amended filing, obtain copies
2-52 of the amended filing on payment of any legally required copying
2-53 cost, and submit to the commissioner written comments or
2-54 information related to the amended filing in the manner provided by
2-55 Subdivision (4) of this subsection, and may hold a hearing not
2-56 later than the 20th day after the date on which the department
2-57 receives the amended filing in the manner provided by Subdivision
2-58 (5) of this subsection. Not later than the 10th day after the date
2-59 on which the hearing on the amended filing is concluded, the
2-60 commissioner shall approve or disapprove the amended filing.
2-61 Within 30 days after the amended filing is received, the
2-62 commissioner shall approve or disapprove an amended filing or it is
2-63 deemed approved. The requirements imposed under Subdivisions (6)
2-64 and (7) of this subsection apply to a hearing conducted under this
2-65 subdivision.
2-66 (9) In conjunction with the review of a filing or
2-67 amended filing, the commissioner may request the Association to
2-68 provide additional supporting information relating to the filing or
2-69 amended filing, and any interested person may file a written
2-70 request with the commissioner for additional supporting information
3-1 relating to the filing or amended filing. A request under this
3-2 subdivision must be reasonable and must be directly related to the
3-3 filing or amended filing. The commissioner shall submit to the
3-4 Association all requests for additional supporting information made
3-5 under this subdivision for the commissioner's use and the use of
3-6 any interested person. The Association shall provide the
3-7 information to the commissioner not later than the fifth day after
3-8 the date on which the written request for additional supporting
3-9 information is delivered to the Association. The department shall
3-10 notify an interested person who has requested additional
3-11 information of the availability of the information not later than
3-12 one business day after the date on which the commissioner receives
3-13 the information from the Association.
3-14 (10) A filing made under this subsection may not
3-15 reflect an annual premium rate change that is more than 15 percent
3-16 (higher or lower) of the rate for commercial windstorm and hail
3-17 insurance in each rate classification in effect on September 1,
3-18 1995. This subdivision expires January 1, 2001, provided however,
3-19 that the commissioner may, after notice and hearing, suspend this
3-20 subdivision upon a finding that a catastrophe loss or series of
3-21 occurrences resulting in losses in the catastrophe area justify a
3-22 need to assure rate adequacy in the catastrophe area and also
3-23 justify a need to assure availability of insurance outside the
3-24 catastrophe area.
3-25 (11) If valid flood or rising water insurance coverage
3-26 exists and is maintained on any risk being insured in the pool, the
3-27 commissioner <State Board of Insurance> may provide for a rate and
3-28 reduction in rate of premium as may be appropriate.
3-29 (12) The catastrophe element of extended coverage
3-30 rates promulgated or filed by the commissioner <Board> under this
3-31 Act applicable to commercial risks written by the Association shall
3-32 be uniform throughout the seacoast territory and shall be based on
3-33 all monoline extended coverage loss experience of all regulated
3-34 insurers authorized to do business in this state, including the
3-35 Association, for property located in the seacoast territory, using
3-36 the most recent 30 years' experience available. Surcharges
3-37 collected in the past and used in the development of current manual
3-38 rates may not be excluded from future rate development as long as
3-39 those surcharges were collected during the experience period used
3-40 by the commissioner <Board>.
3-41 (13) The association shall either establish a
3-42 reinsurance program or enter into a contract as provided in
3-43 Subsection (i) of this section. The Texas Department of Insurance
3-44 may approve any reinsurance program.
3-45 SECTION 3. Not later than December 31, 1995, the
3-46 commissioner of insurance shall submit to the governor, lieutenant
3-47 governor, and speaker of the house of representatives a report
3-48 containing the commissioner's conclusions and recommendations for
3-49 further action regarding the treatment of claims resulting from a
3-50 significant natural catastrophe. The report must include:
3-51 (1) necessary administrative and legislative measures
3-52 to adequately respond to a substantial volume of claims resulting
3-53 from a significant natural catastrophe;
3-54 (2) administrative and legislative measures for
3-55 coordination and cooperation among applicable state agencies as
3-56 necessary to:
3-57 (A) ensure prompt and fair payment of claims
3-58 resulting from a significant natural catastrophe; and
3-59 (B) protect the Texas Catastrophe Property
3-60 Insurance Association from fraudulent claims; and
3-61 (3) an analysis of the adequacy of the rate structure
3-62 of the Texas Catastrophe Property Insurance Association to ensure
3-63 recovery by the association from financial losses resulting from a
3-64 significant natural catastrophe.
3-65 SECTION 4. This Act takes effect on September 1, 1995, and
3-66 applies only to an insurance policy that is delivered, issued for
3-67 delivery, or renewed on or after January 1, 1996. A policy that is
3-68 delivered, issued for delivery, or renewed before January 1, 1996,
3-69 is governed by the law as it existed immediately before the
3-70 effective date of this Act, and that law is continued in effect for
4-1 that purpose.
4-2 SECTION 5. The importance of this legislation and the
4-3 crowded condition of the calendars in both houses create an
4-4 emergency and an imperative public necessity that the
4-5 constitutional rule requiring bills to be read on three several
4-6 days in each house be suspended, and this rule is hereby suspended.
4-7 * * * * *