SRC-AMY S.B. 1605 78(R)   BILL ANALYSIS


Senate Research Center   S.B. 1605
By: Ellis, Rodney
Business & Commerce
4/12/2003
As Filed


DIGEST AND PURPOSE 

Currently, Texas law authorizes the commissioner of insurance, under
certain conditions, to establish a residual market mechanism for
residential property insurance known as Fair Access to Insurance
Requirements (FAIR) Plan. Current law does not provide a funding mechanism
for initial operation of the FAIR Plan.  As proposed, S.B. 1605 requires
the Texas Public Finance Authority to issue revenue bonds to fund the FAIR
Plan association in an amount not to exceed $75 million and establishes
the structure for that program. 

RULEMAKING AUTHORITY

Rulemaking authority is expressly granted to the commissioner of insurance
in SECTION 1 (Article 21.49A-1, Section 10, Insurance Code) of this bill. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Chapter 21, Insurance Code, by adding Article 21.49A-1,
as follows: 

Article 21.49A-1.  REVENUE BOND PROGRAM FOR FAIR PLAN ASSOCIATION.

Sec. 1.  PURPOSE.  Sets forth findings of the legislature.

Sec. 2.  DEFINITIONS.  Defines "association," "bond resolution," "board,"
and "insurer." 

Sec. 3.  BONDS AUTHORIZED; APPLICATION OF TEXAS PUBLIC FINANCE AUTHORITY
ACT.  (a) Requires the Texas Public Finance Authority, on behalf of the
Fair Access to Insurance Requirements (FAIR) Plan association
(association), to issue revenue bonds to fund the association and pay
certain costs. 

(b) Provides that to the extent not inconsistent with this article,
Chapter 1232 (Texas Public Finance Authority), Government Code, applies to
bonds issued under this article.  Provides that in the event of a
conflict, this article controls. 

Sec. 4.  APPLICABILITY OF OTHER STATUTES.  Provides that certain laws
apply to bonds issued under this article, to the extent consistent with
this article. 

Sec. 5.  LIMITS.  Authorizes the Texas Public Finance Authority (TPFA) to
issue, on behalf of the association, bonds in a total amount not to exceed
$75 million. 

Sec. 6.  CONDITIONS.  (a) Authorizes bonds to be issued at public or
private sale. 

(b) Requires bonds to mature not more than 10 years after the date issued.

(c) Requires bonds to be issued in the name of the association.

Sec. 7.  ADDITIONAL COVENANTS.  Authorizes the TPFA board of directors
(board), in a bond resolution, to make additional covenants with respect
to the bonds and the designated income and receipts of the association
pledged to their payment and to provide  for the flow of funds and the
establishment, maintenance, and investment of funds and accounts with
respect to the bonds. 

Sec. 8.  SPECIAL ACCOUNTS.  (a) Authorizes a bond resolution to establish
special accounts, including an interest and sinking fund account, reserve
account, and other accounts. 

(b) Requires the association to administer the accounts in accordance with
Article 21.49A (FAIR Plan (Fair Access to Insurance Requirements) Act) of
this code. 

Sec. 9.  SECURITY.  (a) Provides that bonds are payable only from the
surcharge fee established in Section 10 of this article or other sources
the association is authorized to levy, charge, and collect in connection
with paying any portion of the bonds. 

(b) Provides that bonds are obligations solely of the association.
Provides that bonds do not create a pledging, giving, or lending of the
faith, credit, or taxing authority of this state. 

(c) Requires each bond to include a statement that the state is not
obligated to pay any amount on the bond and that the faith, credit, and
taxing authority of this state are not pledged, given, or lent to those
payments. 

(d) Requires each bond issued under this article to state on its face that
the bond is payable solely from the revenues pledged for that purpose and
that the bond does not and may not constitute a legal or moral obligation
of the state. 

Sec. 10.  SURCHARGE FEE.  (a) Provides that a surcharge fee is assessed
against each insurer and the association. 

(b) Requires the surcharge fee to be set by the commissioner of insurance
(commissioner) in an amount sufficient to pay all debt service on the
bonds. Requires the surcharge to be paid by each insurer and the
association as required by the commissioner by rule. 

(c) Requires the comptroller to collect the surcharge fee and requires the
Texas Department of Insurance to reimburse the comptroller in the manner
described by Article 4.19 of this code. 

(d) Authorizes the commissioner, in consultation with the comptroller, to
coordinate payment and collection of the surcharge fee with other payments
made by insurers and collected by the comptroller. 

(e) Provides that as a condition of engaging in the business of insurance
in this state, an insurer agrees that if the company leaves the property
insurance market in this state the insurer remains obligated to pay, until
the bonds are retired, the insurer's share of the surcharge fee assessed
under this section in an amount proportionate to that insurer's share of
the property insurance market, including residential property insurance,
in this state as of the last complete reporting period before the date on
which the insurer ceases to engage in that insurance business in this
state.  Requires the proportion assessed against the insurer to be based
on the insurer's gross premiums for property insurance, including
residential property insurance, for the insurer's last reporting period.
Provides that an insurer is not required to pay the proportionate amount
in any year in which the surcharge fee assessed against insurers
continuing to write property insurance in this state is sufficient to
service the bond obligation. 

Sec. 11.  TAX EXEMPT.  Provides that the bonds issued under this article,
and any interest from the bonds, and all assets pledged to secure the
payment of the bonds are free from taxation by the state or a political
subdivision of this state. 
 Sec. 12.  AUTHORIZED INVESTMENTS.  Provides that the bonds issued under
this article constitute authorized investments under Article 2.10
(Investment of Funds in Excess of Minimum Capital and Minimum Surplus) and
Subpart A, Part I, Article 3.39 (Authorized Investments and Loans for
"Domestic" Life Insurance Companies; Authorized Investments; Any of Its
Funds and Accumulations), of this code. 

Sec. 13.  STATE PLEDGE.  Provides that the state pledges to and agrees
with the owners of any bonds issued in accordance with this article that
the state will not limit or alter the rights vested in the association to
fulfill the terms of any agreements made with the owners of the bonds or
in any way impair the rights and remedies of those owners until the bonds,
any premium or interest, and all costs and expenses in connection with any
action or proceeding by or on behalf of those owners are fully met and
discharged. Authorizes the association to include this pledge and
agreement of the state in any agreement with the owners of the bonds. 

Sec. 14.  ENFORCEMENT BY MANDAMUS.  Provides that a writ of mandamus and
all other legal and equitable remedies are available to any party at
interest to require the association and any other party to carry out
agreements and to perform functions and duties under this article, the
Texas Constitution, or a bond resolution. 

SECTION 2. Effective date:  upon passage or September 1, 2003.