1-1 AN ACT
1-2 relating to coverage provided under certain policies issued through
1-3 the Texas Catastrophe Property Insurance Association.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 8(h)(13), Texas Catastrophe Property
1-6 Insurance Pool Act (Article 21.49, Insurance Code), is amended to
1-7 read as follows:
1-8 (13) The association shall either establish a
1-9 reinsurance program approved by the Texas Department of Insurance
1-10 or enter into a contract as provided in Subsection (i) of this
1-11 section. With the approval of the [The] Texas Department of
1-12 Insurance, the association may establish a [approve any]
1-13 reinsurance program that operates in addition to or in concert with
1-14 a contract entered into under Subsection (i) of this section.
1-15 SECTION 2. Sections 8A(a) and (c), Texas Catastrophe
1-16 Property Insurance Pool Act (Article 21.49, Insurance Code), are
1-17 amended to read as follows:
1-18 (a) A policy of windstorm and hail insurance issued by the
1-19 Association may include replacement cost coverage for one and
1-20 two-family dwellings, including outbuildings, as provided under the
1-21 dwelling extension coverage in the policy [as that term is defined
1-22 in the General Basis Schedule], subject to any applicable
1-23 deductibles and the limits for the coverage purchased by the
1-24 insured. [The replacement cost coverage does not apply to outdoor
2-1 antennas, aerials, carpeting, awnings, appliances, or other outdoor
2-2 equipment, whether or not attached to the insured dwelling.]
2-3 (c) The Commissioner [Board] may promulgate such rules and
2-4 regulations as necessary to implement this section.
2-5 SECTION 3. Section 8D, Texas Catastrophe Property Insurance
2-6 Pool Act (Article 21.49, Insurance Code), is amended to read as
2-7 follows:
2-8 Sec. 8D. LIABILITY LIMITS. (a) The maximum limits of
2-9 liability under a [A] policy of windstorm and hail insurance issued
2-10 by the Association under this Act shall be proposed by the board of
2-11 directors of the Association and must be approved by the
2-12 Commissioner. The maximum limits of liability for [provide]
2-13 coverage on [for] any one insurable property may not be less than
2-14 [in amounts equal to]:
2-15 (1) $350,000 [$250,000] for a dwelling, including an
2-16 individually owned townhouse unit, and the corporeal movable
2-17 property located in or about the dwelling, and as an extension of
2-18 coverage, away from those premises, as provided under the policy
2-19 [the term "dwelling" is defined in the special dwelling,
2-20 homeowners, or farm and ranch property owners schedules of the
2-21 General Basis Schedule];
2-22 (2) $2,192,000 [$2 million] for a building and the
2-23 corporeal movable property located in the building that is owned
2-24 by, and at least 75 percent of which is occupied by, a governmental
2-25 entity, or that is not owned by, but is wholly and exclusively
2-26 occupied by, a governmental entity;
2-27 (3) $125,000 [$750,000 per building for an apartment,
3-1 condominium, or townhouse defined as a risk under the apartment
3-2 house rating schedule, residential condominium rating schedule, or
3-3 townhouse unit rating schedule of the General Basis Schedule and
3-4 the corporeal movable property of the owner of the structure in
3-5 which the apartment, condominium, or townhouse is located;]
3-6 [(4) $100,000] for individually owned corporeal
3-7 movable property located in an apartment unit, residential
3-8 condominium unit, or townhouse unit that is occupied by the owner
3-9 of that property, and as an extension of coverage, away from those
3-10 premises, as provided under the policy; and
3-11 (4) $1,500,000 [(5) $1 million] for a structure other
3-12 than a dwelling or a public building and the corporeal movable
3-13 property located in that structure and, as an extension of
3-14 coverage, away from those premises, as provided under the policy.
3-15 (b) Notwithstanding Subsection (a) of this section, the
3-16 liability limit imposed under Subsection (a)(2) of this section is
3-17 frozen, and the indexing and adjustments provided by this section
3-18 do not apply to that liability limit, until the liability limit
3-19 imposed on a structure subject to Subsection (a)(4) of this section
3-20 and the corporeal property located in that structure reaches or
3-21 exceeds $2,192,000, at which time the liability limit shall be
3-22 indexed and adjusted as provided for a risk under Subsection (a)(4)
3-23 of this section.
3-24 (c) Liability limits for insurable property that is not
3-25 covered under Subsection (a) of this section shall be established
3-26 by the plan of operation.
3-27 (d) Not later than September 30 of each year, the board of
4-1 directors of the Association [(c) The Board, as part of the annual
4-2 rate hearings conducted by the Board,] shall propose adjustments to
4-3 [adjust] the liability limits for inflation. The proposed
4-4 adjustments shall be made in increments of $1,000, rounded to the
4-5 nearest $1,000, considering[, including] the limits set by
4-6 Subsection (a) of this section, at a rate that reflects any change
4-7 in the BOECKH [BOECK] Index. If the BOECKH Index ceases to exist,
4-8 the board of directors of the Association shall propose
4-9 adjustments to the nearest $1,000 in round numbers to the liability
4-10 limits for inflation based on any [or] other index that the board
4-11 determines [may] accurately reflects [reflect] changes in the cost
4-12 of construction or residential values in the catastrophe area. An
4-13 adjustment to the liability limits that is approved by the
4-14 Commissioner applies to each policy of windstorm and hail insurance
4-15 delivered, issued for delivery, or renewed on or after January 1 of
4-16 the year following the approval by the Commissioner of the
4-17 adjustment to the liability limits. The indexing of the liability
4-18 limits [of liability] shall adjust for changes occurring [apply as
4-19 determined by the Board] on and after January 1, 1997 [1992].
4-20 (e) The board of directors of the Association may propose
4-21 additional increases in the liability limits as it determines
4-22 necessary to implement the purposes of this Act.
4-23 (f) Not later than the 10th day after the date on which the
4-24 proposed adjustment to the liability limits is determined under
4-25 Subsection (a), (b), (d), or (e) of this section, the Association
4-26 shall file its proposed adjustments with the Commissioner in
4-27 writing. The filing must include:
5-1 (1) a statement of the proposed adjusted liability
5-2 limits;
5-3 (2) a statement of the liability limits in effect
5-4 immediately preceding the effective date of the proposed
5-5 adjustment;
5-6 (3) a brief summary of the changes to the BOECKH Index
5-7 or other index on which the proposed adjustments are based; and
5-8 (4) a brief summary of the computations used in
5-9 determining the proposed adjustments.
5-10 (g) Not later than the 60th day after the date of receipt of
5-11 the filing made under Subsection (f) of this section, and after
5-12 notice and hearing, the Commissioner by order shall approve,
5-13 disapprove, or modify the proposed adjustments to the liability
5-14 limits.
5-15 (h) [(d)] Notwithstanding Subsections [(b) and] (c)-(g) of
5-16 this section, the Commissioner [Board] may not approve adjustments
5-17 of [adjust] liability limits to amounts lower than the amounts
5-18 prescribed [adopted] under Subsection (a) of this section.
5-19 (i) Article 1.33B of this code does not apply to an action
5-20 taken under this section. [(e) A policyholder who is insured on
5-21 September 1, 1991, for an amount higher than the liability limits
5-22 prescribed by Subsection (a) of this section may not be required to
5-23 reduce the insurance coverage to an amount lower than the amount in
5-24 effect on September 1, 1991.]
5-25 SECTION 4. The Texas Catastrophe Property Insurance Pool Act
5-26 (Article 21.49, Insurance Code) is amended by adding Section 8E to
5-27 read as follows:
6-1 Sec. 8E. REINSURED EXCESS LIMITS. (a) Notwithstanding any
6-2 other law, the Association may issue a policy of windstorm and hail
6-3 insurance that includes coverage for an amount in excess of a
6-4 liability limit proposed by the Association and approved by the
6-5 Commissioner under Section 8D of this Act if the Association first
6-6 obtains, from a reinsurer approved by the Commissioner, reinsurance
6-7 for the full amount of policy exposure above the limits approved by
6-8 the Commissioner for any given type of risk.
6-9 (b) The premium charged by the Association for the excess
6-10 coverage shall be equal to the amount of the reinsurance premium
6-11 charged to the Association by the reinsurer, plus any payment to
6-12 the Association that is approved by the Commissioner.
6-13 (c) The Commissioner shall adopt rules as necessary to
6-14 implement this section. The Association may not issue excess
6-15 coverage under this section until those rules are adopted.
6-16 (d) Article 1.33B of this code does not apply to an action
6-17 taken under this section.
6-18 SECTION 5. Section 19(a), Texas Catastrophe Property
6-19 Insurance Pool Act (Article 21.49, Insurance Code), is amended to
6-20 read as follows:
6-21 (a) If, in any calendar year, an occurrence or series of
6-22 occurrences within the defined catastrophe area results in insured
6-23 losses and operating expenses of the association in excess of
6-24 premium and other revenue of the association, any excess losses
6-25 shall be paid as follows:
6-26 (1) $100 million shall be assessed to the members of
6-27 the association with the proportion of the loss allocable to each
7-1 insurer determined in the same manner as its participation in the
7-2 association has been determined for the year under Section 5(c) of
7-3 this Act;
7-4 (2) any losses in excess of $100 million shall be paid
7-5 from [either] the catastrophe reserve trust fund established under
7-6 Section 8(i) of this Act and [or] any reinsurance program
7-7 established by the association;
7-8 (3) for losses in excess of those paid under
7-9 Subdivisions (1) and (2) of this subsection, an additional $200
7-10 million shall be assessed to the members of the association with
7-11 the proportion of the loss allocable to each insurer determined in
7-12 the same manner as its participation in the association has been
7-13 determined for the year under Section 5(c) of this Act;
7-14 (4) any losses in excess of those paid under
7-15 Subdivisions (1), (2), and (3) of this subsection shall be assessed
7-16 against members of the association, with the proportion of the
7-17 total loss allocable to each insurer determined in the same manner
7-18 as its participation in the association has been determined for the
7-19 year under Section 5(c) of this Act.
7-20 SECTION 6. The Texas Catastrophe Property Insurance Pool Act
7-21 (Article 21.49, Insurance Code), as amended by this Act, applies
7-22 only to a policy of windstorm or hail insurance that is delivered,
7-23 issued for delivery, or renewed on or after January 1, 1998. A
7-24 policy that is delivered, issued for delivery, or renewed before
7-25 January 1, 1998, is governed by the law as it existed immediately
7-26 before the effective date of this Act, and that law is continued in
7-27 effect for this purpose.
8-1 SECTION 7. (a) This Act takes effect September 1, 1997.
8-2 (b) The board of directors of the Texas Catastrophe Property
8-3 Insurance Association shall propose initial adjustments for the
8-4 liability limits imposed under Section 8D, Texas Catastrophe
8-5 Property Insurance Pool Act (Article 21.49, Insurance Code), as
8-6 amended by this Act, not later than September 30, 1997.
8-7 SECTION 8. The importance of this legislation and the
8-8 crowded condition of the calendars in both houses create an
8-9 emergency and an imperative public necessity that the
8-10 constitutional rule requiring bills to be read on three several
8-11 days in each house be suspended, and this rule is hereby suspended.
_______________________________ _______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 1853 was passed by the House on May
1, 1997, by a non-record vote.
_______________________________
Chief Clerk of the House
I certify that H.B. No. 1853 was passed by the Senate on May
21, 1997, by a viva-voce vote.
_______________________________
Secretary of the Senate
APPROVED: _____________________
Date
_____________________
Governor