GEC C.S.H.B. 3354 75(R) BILL ANALYSIS BUSINESS & INDUSTRY C.S.H.B. 3354 By: Dukes 3-28-97 Committee Report (Substituted) BACKGROUND In the past, the Texas Workers' Compensation Insurance Fund's (Fund) Board of Directors has experienced problems conducting routine business when board members' terms expired and no successor was appointed for a period of time. CSHB 3354 would enable the board of directors to continue conducting the business of the Fund in the event that delays arise in the appointment or reappointment of Board members. CSHB 3354 also addresses the Fund's recommendation that its board be required to meet quarterly, rather than monthly, now that Fund operations have stabilized. The Fund is currently restricted in the amount of interest that it may charge employers electing not to prepay workers' compensation premiums and has requested the ability to charge more competitive rates. CSHB 3354 would enable the Fund to more effectively compete in this area. The Fund is also restricted in the amount of reserves it must maintain in excess of the amount of its outstanding premiums. This is commonly called a "surplus". The Fund has requested authority to use a portion of its surplus to pay-off, before maturity, the bonds initially used to start-up the Fund. PURPOSE This proposed legislation makes the following changes and clarifications with regard to the powers and duties of the Fund and its Board of Directors. - adds language to the Fund's statute clarifying the legislative purposes for the Fund's existence; - enables the board to conduct routine business when delays arise in the appointment or reappointment of Board members; - allows the board to meet quarterly rather than monthly; - allows the Fund to charge higher, more competitive rates of interest to employers choosing not to prepay their workers' compensation insurance premiums; - authorizes the Fund to use 20 percent of its surplus each year for the purpose of retiring the bonds used to start-up the Fund. 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 Section 2(a), Article 5.76-3, Insurance Code, by stating that the Fund shall (1) serve as a competitive force in the workers' compensation insurance marketplace, (2) guarantee the availability of workers' compensation insurance in Texas, and (3) serve as an insurer of last resort as provided under Article 4.76-4 of the Insurance Code. SECTION 2. Amends Sections 3(a), Article 5.76-3, Insurance Code, by adding language establishing that a member of the board of directors whose term expires will continue to serve on the board of directors until a replacement is appointed by the governor. Amends Section 3(m), Article 5.76-3, Insurance Code, by requiring that the board of directors meet quarterly rather than once a month. SECTION 3. Amends Section 7(c), Article 5.76-3, Insurance Code, by deleting language pertaining to the rate that the Board may charge for premium financing. SECTION 4. Amends Article 5.76-3, Insurance Code as follows: Subsection 13(d). Requires that the comptroller, rather than the state treasurer, approve the Fund's investment policy. Subsection 13(f). Deletes statutory provisions that have expired and renumbers subsection. Subsection 13(g). Authorizes the board of directors to use, not more than once in a calendar year, up to 20 percent of any surplus that exceeds the ratio specified in subsection (f), to assist in prepaying or retiring before maturity the Fund's capitalization bonds. that exceeds the over the amount required for the Fund to maintain a ratio of net written premiums on policies written after reinsurance to surplus of 3.0 to one. CSHB 3354 would give the Fund specific authority to utilize up to 20 percent of its surplus each year to pay-off, or retire, the bonds initially used to capitalize the Fund before maturity. Subsection 13(h). Changes "Texas Department of Insurance" to "department." Subsection 13(i). Changes "Texas Department of Insurance" to "department;" changes "State Board of Insurance" to "commissioner;" and changes "that board's" to "commissioner's." This last change requires that the commissioner of insurance rather than the former State Board of Insurance include a report on the Fund's condition in the commissioner's annual report under Article 1.25, Insurance Code. SECTION 5. Establishes that the Act takes effect September 1, 1997. SECTION 6. Suspends the three-day rule. COMPARISON OF ORIGINAL TO SUBSTITUTE SECTION 4 - Section 13(f), Article 5.76-3, Insurance Code, deletes the words "subject to subsection(g) of this section, the" SECTION 4 - Section 13(g), Article 5.76-3, Insurance Code, changes the original language which reads "(g) The board may use, for any purpose authorized under this article, an amount not to exceed 20 percent of any surplus that is in excess of that amount required to maintain a ratio of net written premiums on policies written after reinsurance to surplus of 3.0 to one." to "Not more than once in any calendar year, the Board may use up to 20% of any surplus that exceeds the ratio specified in subsection(f) of this section to assist in prepaying or retiring before maturity the bonds issued pursuant to Article 5.76-5, Insurance Code."