RS C.S.H.B. 3383 75(R) BILL ANALYSIS INSURANCE C.S.H.B. 3383 By: Eiland 4-15-97 Committee Report (Substituted) BACKGROUND Implementation of any new building codes will increase cost in construction for consumers along the Texas coast. The increase cost to build to a stronger building code for risks insured in the TCPIA will reduce losses and a need to offset that increased cost with a premium reduction should be provided. PURPOSE This bill defines new building code to mean any building standard, specification, or guideline adopted by the commissioner after May 1, 1997 that must be met for new residential construction for insurance through the TCPIA and sets forth a mechanism for the commissioner to hold a hearing to determine the percentage of across the board reductions in insurance rates required for windstorm and hail coverage written by the association on newly constructed residences. Failure of the commissioner to establish an insurance rate reduction will trigger an automatic 15% rate roll back. RULEMAKING AUTHORITY The bill does not expressly grant rulemaking authority, but does provide for a rulemaking hearing to be conducted by the commissioner under SECTION 3 of bill, (Section 8E of Article 21.49, Insurance Code). SECTION BY SECTION ANALYSIS SECTION 1. Provides for the findings of the legislature in eliminating any negative impact of new building code standards on consumers through insurance rate reductions SECTION 2. Amends Section 3, Article 21.49, Insurance Code, by adding Section (o) as follows: (o) Defines "new building code" in relation to application of any rate rollback for the implementation of a new building code. SECTION 3. Amends Article 21.49, Insurance Code, by adding Section 8E as follows: Sec. 8E - RATE ROLLBACK Provides for the commissioner to hold a rulemaking hearing to determine the percentage of across the board reductions in insurance rates required on a windstorm and hail insurance policy written by the association on new residential construction subject to a new building code. Establishes that the commissioner must issue an order mandating the appropriate rate reductions within 180 days from the implementation of a new building code. Requires a mandatory 15% rate reduction if the commissioner fails to act within the first 180 days after the implementation of a new building code. SECTION 4. Emergency Clause. Act takes effect from and after its passage. COMPARISON OF ORIGINAL TO SUBSTITUTE The committee substitute amends the definition from building code to new building code and specifically indicates such new building code must be adopted by the commissioner rather than issued by the Department. Removes all reference to an insurer other than the association to clearly indicate the rate reduction is applicable only to policies of insurance written by the association for windstorm and hail insurance and does not apply to insurance written by insurers in the voluntary market.