By Eiland H.B. No. 2253
76R6120 PB-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the operation of the catastrophe reserve trust fund.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Section 8(h)(13), Article 21.49, Insurance Code,
1-5 is amended to read as follows:
1-6 (13) The association shall either establish a
1-7 reinsurance program approved by the Texas Department of Insurance
1-8 or make payments into the catastrophe reserve trust fund
1-9 established under [enter into a contract as provided in] Subsection
1-10 (i) of this section. With the approval of the Texas Department of
1-11 Insurance, the association may establish a reinsurance program that
1-12 operates in addition to or in concert with the catastrophe reserve
1-13 trust fund established [a contract entered into] under Subsection
1-14 (i) of this section.
1-15 SECTION 2. Section 8(i), Article 21.49, Insurance Code, is
1-16 amended to read as follows:
1-17 (i)(1) The commissioner shall adopt rules [association may
1-18 enter into a written agreement with the Texas Department of
1-19 Insurance] under which the association members relinquish their net
1-20 equity [pursuant to the written agreement] on an annual basis as
1-21 provided by those rules by making payments to a fund known as the
1-22 catastrophe reserve trust fund to pay the obligations of that fund
1-23 under Section 19(a) of this Act [be held by the Texas Department of
1-24 Insurance outside the state treasury to protect policyholders of
2-1 the association] and to fund the mitigation and preparedness plan
2-2 established under this subsection to reduce the potential for
2-3 payments by members of the association giving rise to tax credits
2-4 in the event of loss or losses. Until disbursements are made as
2-5 provided by this Act and rules adopted by the commissioner, all
2-6 money, including investment income, deposited in the catastrophe
2-7 reserve trust fund is state money to be held by the comptroller
2-8 outside the state treasury on behalf of, and with legal title in,
2-9 the department. If the fund is terminated by law, all assets of
2-10 the fund revert to the state to be used to provide funding for the
2-11 annual loss mitigation and preparedness plan developed and
2-12 implemented by the commissioner under Subdivision (5) of this
2-13 subsection.
2-14 (2) The catastrophe reserve trust fund shall be kept
2-15 and maintained by the Texas Department of Insurance pursuant to
2-16 this Act and rules adopted by the commissioner [the written
2-17 agreement between the association, the Texas Department of
2-18 Insurance, and the comptroller]. [Legal title to money and
2-19 investments in the fund is in the Texas Department of Insurance
2-20 unless or until paid out as provided by the written agreement.]
2-21 The comptroller, as custodian, shall administer the funds strictly
2-22 and solely as provided by [the agreement and the state may not take
2-23 any action with respect to the fund other than as specified by]
2-24 this Act and the commissioner's rules [act and the agreement].
2-25 (3) At [On the effective date of an agreement, all
2-26 funds held on behalf of or paid to the association under one or
2-27 more reinsurance plans or programs may be immediately paid to the
3-1 catastrophe reserve trust fund. Thereafter, at] the end of either
3-2 each calendar year or policy year, the association shall [may] pay
3-3 the net equity of a member, including all premium and other revenue
3-4 of the association in excess of incurred losses and operating
3-5 expenses to the catastrophe reserve trust fund or a reinsurance
3-6 program approved by the Commissioner [of Insurance].
3-7 (4) The commissioner's rules [written agreement] shall
3-8 establish the procedure relating to the disbursement of money
3-9 [funds] from the catastrophe reserve trust fund to policyholders in
3-10 the event of an occurrence or series of occurrences within the
3-11 defined catastrophe area that results in a disbursement under
3-12 Section 19(a) of this Act [insured losses and operating expenses
3-13 of the association greater than $100 million].
3-14 (5) Each fiscal year, the department may use from the
3-15 investment income of the fund an amount equal to the lesser of $10
3-16 million or 10 percent of the investment income of the prior fiscal
3-17 year to provide funding for an annual mitigation and preparedness
3-18 plan to be developed and implemented each year by the commissioner.
3-19 From that amount and as part of that plan, the department may
3-20 implement the windstorm inspection program established under
3-21 Section 6A of this Act. The mitigation and preparedness plan shall
3-22 provide for steps to be taken in the seacoast territory by the
3-23 commissioner or by a local government, state agency, educational
3-24 institution, or nonprofit organization designated by the
3-25 commissioner in the plan, to implement programs intended to improve
3-26 preparedness for windstorm and hail catastrophes, reduce potential
3-27 losses in the event of such a catastrophe, provide research into
4-1 the means to reduce those losses, educate or inform the public in
4-2 determining the appropriateness of particular upgrades to
4-3 structures, or protect infrastructure from potential damage from
4-4 those catastrophes. Money in excess of $1 million is not available
4-5 for use under this subsection if the commissioner determines that
4-6 an expenditure of investment income from the fund would jeopardize
4-7 the actuarial soundness of the fund or materially impair the
4-8 ability of the fund to serve the state purposes for which it was
4-9 established.
4-10 SECTION 3. This Act takes effect September 1, 1999.
4-11 SECTION 4. The importance of this legislation and the
4-12 crowded condition of the calendars in both houses create an
4-13 emergency and an imperative public necessity that the
4-14 constitutional rule requiring bills to be read on three several
4-15 days in each house be suspended, and this rule is hereby suspended.