1-1 By: Eiland, et al. (Senate Sponsor - Patterson) H.B. No. 1853
1-2 (In the Senate - Received from the House May 2, 1997;
1-3 May 5, 1997, read first time and referred to Committee on Economic
1-4 Development; May 16, 1997, reported favorably by the following
1-5 vote: Yeas 8, Nays 0; May 16, 1997, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to coverage provided under certain policies issued through
1-9 the Texas Catastrophe Property Insurance Association.
1-10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-11 SECTION 1. Section 8(h)(13), Texas Catastrophe Property
1-12 Insurance Pool Act (Article 21.49, Insurance Code), is amended to
1-13 read as follows:
1-14 (13) The association shall either establish a
1-15 reinsurance program approved by the Texas Department of Insurance
1-16 or enter into a contract as provided in Subsection (i) of this
1-17 section. With the approval of the [The] Texas Department of
1-18 Insurance, the association may establish a [approve any]
1-19 reinsurance program that operates in addition to or in concert with
1-20 a contract entered into under Subsection (i) of this section.
1-21 SECTION 2. Sections 8A(a) and (c), Texas Catastrophe
1-22 Property Insurance Pool Act (Article 21.49, Insurance Code), are
1-23 amended to read as follows:
1-24 (a) A policy of windstorm and hail insurance issued by the
1-25 Association may include replacement cost coverage for one and
1-26 two-family dwellings, including outbuildings, as provided under the
1-27 dwelling extension coverage in the policy [as that term is defined
1-28 in the General Basis Schedule], subject to any applicable
1-29 deductibles and the limits for the coverage purchased by the
1-30 insured. [The replacement cost coverage does not apply to outdoor
1-31 antennas, aerials, carpeting, awnings, appliances, or other outdoor
1-32 equipment, whether or not attached to the insured dwelling.]
1-33 (c) The Commissioner [Board] may promulgate such rules and
1-34 regulations as necessary to implement this section.
1-35 SECTION 3. Section 8D, Texas Catastrophe Property Insurance
1-36 Pool Act (Article 21.49, Insurance Code), is amended to read as
1-37 follows:
1-38 Sec. 8D. LIABILITY LIMITS. (a) The maximum limits of
1-39 liability under a [A] policy of windstorm and hail insurance issued
1-40 by the Association under this Act shall be proposed by the board of
1-41 directors of the Association and must be approved by the
1-42 Commissioner. The maximum limits of liability for [provide]
1-43 coverage on [for] any one insurable property may not be less than
1-44 [in amounts equal to]:
1-45 (1) $350,000 [$250,000] for a dwelling, including an
1-46 individually owned townhouse unit, and the corporeal movable
1-47 property located in or about the dwelling, and as an extension of
1-48 coverage, away from those premises, as provided under the policy
1-49 [the term "dwelling" is defined in the special dwelling,
1-50 homeowners, or farm and ranch property owners schedules of the
1-51 General Basis Schedule];
1-52 (2) $2,192,000 [$2 million] for a building and the
1-53 corporeal movable property located in the building that is owned
1-54 by, and at least 75 percent of which is occupied by, a governmental
1-55 entity, or that is not owned by, but is wholly and exclusively
1-56 occupied by, a governmental entity;
1-57 (3) $125,000 [$750,000 per building for an apartment,
1-58 condominium, or townhouse defined as a risk under the apartment
1-59 house rating schedule, residential condominium rating schedule, or
1-60 townhouse unit rating schedule of the General Basis Schedule and
1-61 the corporeal movable property of the owner of the structure in
1-62 which the apartment, condominium, or townhouse is located;]
1-63 [(4) $100,000] for individually owned corporeal
1-64 movable property located in an apartment unit, residential
2-1 condominium unit, or townhouse unit that is occupied by the owner
2-2 of that property, and as an extension of coverage, away from those
2-3 premises, as provided under the policy; and
2-4 (4) $1,500,000 [(5) $1 million] for a structure other
2-5 than a dwelling or a public building and the corporeal movable
2-6 property located in that structure and, as an extension of
2-7 coverage, away from those premises, as provided under the policy.
2-8 (b) Notwithstanding Subsection (a) of this section, the
2-9 liability limit imposed under Subsection (a)(2) of this section is
2-10 frozen, and the indexing and adjustments provided by this section
2-11 do not apply to that liability limit, until the liability limit
2-12 imposed on a structure subject to Subsection (a)(4) of this section
2-13 and the corporeal property located in that structure reaches or
2-14 exceeds $2,192,000, at which time the liability limit shall be
2-15 indexed and adjusted as provided for a risk under Subsection (a)(4)
2-16 of this section.
2-17 (c) Liability limits for insurable property that is not
2-18 covered under Subsection (a) of this section shall be established
2-19 by the plan of operation.
2-20 (d) Not later than September 30 of each year, the board of
2-21 directors of the Association [(c) The Board, as part of the annual
2-22 rate hearings conducted by the Board,] shall propose adjustments to
2-23 [adjust] the liability limits for inflation. The proposed
2-24 adjustments shall be made in increments of $1,000, rounded to the
2-25 nearest $1,000, considering[, including] the limits set by
2-26 Subsection (a) of this section, at a rate that reflects any change
2-27 in the BOECKH [BOECK] Index. If the BOECKH Index ceases to exist,
2-28 the board of directors of the Association shall propose
2-29 adjustments to the nearest $1,000 in round numbers to the liability
2-30 limits for inflation based on any [or] other index that the board
2-31 determines [may] accurately reflects [reflect] changes in the cost
2-32 of construction or residential values in the catastrophe area. An
2-33 adjustment to the liability limits that is approved by the
2-34 Commissioner applies to each policy of windstorm and hail insurance
2-35 delivered, issued for delivery, or renewed on or after January 1 of
2-36 the year following the approval by the Commissioner of the
2-37 adjustment to the liability limits. The indexing of the liability
2-38 limits [of liability] shall adjust for changes occurring [apply as
2-39 determined by the Board] on and after January 1, 1997 [1992].
2-40 (e) The board of directors of the Association may propose
2-41 additional increases in the liability limits as it determines
2-42 necessary to implement the purposes of this Act.
2-43 (f) Not later than the 10th day after the date on which the
2-44 proposed adjustment to the liability limits is determined under
2-45 Subsection (a), (b), (d), or (e) of this section, the Association
2-46 shall file its proposed adjustments with the Commissioner in
2-47 writing. The filing must include:
2-48 (1) a statement of the proposed adjusted liability
2-49 limits;
2-50 (2) a statement of the liability limits in effect
2-51 immediately preceding the effective date of the proposed
2-52 adjustment;
2-53 (3) a brief summary of the changes to the BOECKH Index
2-54 or other index on which the proposed adjustments are based; and
2-55 (4) a brief summary of the computations used in
2-56 determining the proposed adjustments.
2-57 (g) Not later than the 60th day after the date of receipt of
2-58 the filing made under Subsection (f) of this section, and after
2-59 notice and hearing, the Commissioner by order shall approve,
2-60 disapprove, or modify the proposed adjustments to the liability
2-61 limits.
2-62 (h) [(d)] Notwithstanding Subsections [(b) and] (c)-(g) of
2-63 this section, the Commissioner [Board] may not approve adjustments
2-64 of [adjust] liability limits to amounts lower than the amounts
2-65 prescribed [adopted] under Subsection (a) of this section.
2-66 (i) Article 1.33B of this code does not apply to an action
2-67 taken under this section. [(e) A policyholder who is insured on
2-68 September 1, 1991, for an amount higher than the liability limits
2-69 prescribed by Subsection (a) of this section may not be required to
3-1 reduce the insurance coverage to an amount lower than the amount in
3-2 effect on September 1, 1991.]
3-3 SECTION 4. The Texas Catastrophe Property Insurance Pool Act
3-4 (Article 21.49, Insurance Code) is amended by adding Section 8E to
3-5 read as follows:
3-6 Sec. 8E. REINSURED EXCESS LIMITS. (a) Notwithstanding any
3-7 other law, the Association may issue a policy of windstorm and hail
3-8 insurance that includes coverage for an amount in excess of a
3-9 liability limit proposed by the Association and approved by the
3-10 Commissioner under Section 8D of this Act if the Association first
3-11 obtains, from a reinsurer approved by the Commissioner, reinsurance
3-12 for the full amount of policy exposure above the limits approved by
3-13 the Commissioner for any given type of risk.
3-14 (b) The premium charged by the Association for the excess
3-15 coverage shall be equal to the amount of the reinsurance premium
3-16 charged to the Association by the reinsurer, plus any payment to
3-17 the Association that is approved by the Commissioner.
3-18 (c) The Commissioner shall adopt rules as necessary to
3-19 implement this section. The Association may not issue excess
3-20 coverage under this section until those rules are adopted.
3-21 (d) Article 1.33B of this code does not apply to an action
3-22 taken under this section.
3-23 SECTION 5. Section 19(a), Texas Catastrophe Property
3-24 Insurance Pool Act (Article 21.49, Insurance Code), is amended to
3-25 read as follows:
3-26 (a) If, in any calendar year, an occurrence or series of
3-27 occurrences within the defined catastrophe area results in insured
3-28 losses and operating expenses of the association in excess of
3-29 premium and other revenue of the association, any excess losses
3-30 shall be paid as follows:
3-31 (1) $100 million shall be assessed to the members of
3-32 the association with the proportion of the loss allocable to each
3-33 insurer determined in the same manner as its participation in the
3-34 association has been determined for the year under Section 5(c) of
3-35 this Act;
3-36 (2) any losses in excess of $100 million shall be paid
3-37 from [either] the catastrophe reserve trust fund established under
3-38 Section 8(i) of this Act and [or] any reinsurance program
3-39 established by the association;
3-40 (3) for losses in excess of those paid under
3-41 Subdivisions (1) and (2) of this subsection, an additional $200
3-42 million shall be assessed to the members of the association with
3-43 the proportion of the loss allocable to each insurer determined in
3-44 the same manner as its participation in the association has been
3-45 determined for the year under Section 5(c) of this Act;
3-46 (4) any losses in excess of those paid under
3-47 Subdivisions (1), (2), and (3) of this subsection shall be assessed
3-48 against members of the association, with the proportion of the
3-49 total loss allocable to each insurer determined in the same manner
3-50 as its participation in the association has been determined for the
3-51 year under Section 5(c) of this Act.
3-52 SECTION 6. The Texas Catastrophe Property Insurance Pool Act
3-53 (Article 21.49, Insurance Code), as amended by this Act, applies
3-54 only to a policy of windstorm or hail insurance that is delivered,
3-55 issued for delivery, or renewed on or after January 1, 1998. A
3-56 policy that is delivered, issued for delivery, or renewed before
3-57 January 1, 1998, is governed by the law as it existed immediately
3-58 before the effective date of this Act, and that law is continued in
3-59 effect for this purpose.
3-60 SECTION 7. (a) This Act takes effect September 1, 1997.
3-61 (b) The board of directors of the Texas Catastrophe Property
3-62 Insurance Association shall propose initial adjustments for the
3-63 liability limits imposed under Section 8D, Texas Catastrophe
3-64 Property Insurance Pool Act (Article 21.49, Insurance Code), as
3-65 amended by this Act, not later than September 30, 1997.
3-66 SECTION 8. The importance of this legislation and the
3-67 crowded condition of the calendars in both houses create an
3-68 emergency and an imperative public necessity that the
3-69 constitutional rule requiring bills to be read on three several
4-1 days in each house be suspended, and this rule is hereby suspended.
4-2 * * * * *