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Amend CSHB 1890 by striking all below the enacting clause and
substituting the following:
SECTION 1. Section 4(d), Article 21.49, Insurance Code, is
amended to read as follows:
(d) On dissolution of the association, all assets of the
association, including the unexpended and unobligated balance of
the catastrophe reserve trust fund as of the date of the
dissolution, revert to this state.
SECTION 2. Section 5, Article 21.49, Insurance Code, is
amended by amending Subsections (g), (h), (i), (j), and (l) and
adding Subsections (n), (o), and (p) to read as follows:
(g) The board of directors of the Association is responsible
and accountable to the commissioner [Board]. The board of
directors is composed of nine members appointed by the commissioner
as follows:
(1) two [five representatives of different insurers
who are] members must be residents of first tier coastal counties,
one of whom must be a licensed insurance agent [of the Association
who shall be elected by members as provided in the plan of
operation];
(2) four members must be representatives of insurers
who are members of the Association, who may reside anywhere in this
state [two representatives of the general public, nominated by the
office of public insurance counsel, who, as of the date of the
appointment, reside in a catastrophe area and who are
policyholders, as of the date of the appointment, of the
Association]; and
(3) three members must be residents of counties other
than first tier coastal counties, at least one of whom must be a
licensed insurance agent [two local recording agents licensed under
this Code with demonstrated experience in the Association, and
whose principal offices, as of the date of the appointment, are
located in a catastrophe area].
(h) Members of the board of directors of the Association
serve two-year [three-year] staggered terms, with the terms of
three members expiring on the third Tuesday of March of each year.
A member of the board of directors serves at the pleasure of the
commissioner and may be removed by the commissioner before the
expiration of the member's term. [A person may hold a seat on the
board of directors for not more than three consecutive full terms,
not to exceed nine years.]
(i) The persons appointed as provided by Subsection (g)
[Subsections (g)(2) and (g)(3)] of this section must have
demonstrated business, insurance, or financial experience to be
eligible for appointment [be from different counties].
(j) The board of directors of the Association shall select
one member of the board of directors to serve as presiding officer
of the board of directors. The presiding officer serves at the
pleasure of the board of directors and is entitled to vote on all
matters before the board of directors. The board of directors [of
the Association] shall elect other officers of the board of
directors [an executive committee consisting of a chairman,
vice-chairman, and secretary-treasurer] from its membership. [At
least one of those officers must be a member appointed under
Subsection (g)(2) or Subsection (g)(3) of this section.]
(l) If an occurrence or series of occurrences within the
defined catastrophe area results in insured losses that result in
payment of losses under Section 19 of this article [tax credits
under Section 19(4) of this article in a single calendar year], the
Association shall immediately notify the commissioner [Board] of
that fact. The commissioner [Board] on receiving notice shall
immediately notify the Governor and appropriate committees of each
house of the Legislature of the amount of insured losses eligible
for payment under Section 19 [tax credits under Section 19(4)] of
this article.
(n) The board of directors shall report annually to the
governor, the lieutenant governor, and the speaker of the house of
representatives regarding:
(1) the solvency of the Association;
(2) the sufficiency of the Association's reserves;
(3) the sufficiency of the rates charged for insurance
coverage through the Association, including:
(A) an analysis of any difference between rates
actually being charged and actuarially sufficient rates; and
(B) if there is a difference, the reasons for
that difference; and
(4) any outstanding risks to the Association and the
members of the Association.
(o) As an exception to Chapter 551, Government Code, and
other law, members of the board of directors may meet by telephone
conference call, videoconference, or other similar
telecommunication method. The board of directors may use telephone
conferences or other similar telecommunication methods for
purposes of establishing a quorum, for purposes of voting, and for
any other meeting purpose in accordance with this subsection and
Subsection (p). This subsection applies without regard to the
subject matters discussed or considered by the members of the board
of directors at the meeting.
(p) A meeting held by use of telephone conference call,
videoconference, or other similar telecommunication method:
(1) is subject to the notice requirements applicable
to other meetings;
(2) must specify in the notice of the meeting the
location of the meeting;
(3) must be audible to the public at the location
specified in the notice of the meeting as the location of the
meeting; and
(4) must provide two-way audio communication between
all members of the board of directors attending the meeting during
the entire meeting, and if the two-way audio communication link
with members attending the meeting is disrupted at any time so that
a quorum of the board of directors is no longer participating in the
meeting, the meeting may not continue until the two-way audio
communication link is reestablished.
SECTION 3. Article 21.49, Insurance Code, is amended by
adding Section 5C to read as follows:
Sec. 5C. GENERAL POWERS AND DUTIES OF BOARD OF DIRECTORS.
(a) The board of directors shall:
(1) recommend rates to the department in the manner
provided by Section 8 of this article for insurance coverage
provided by the Association; and
(2) determine:
(A) coverage limits;
(B) applicable deductibles; and
(C) any premium surcharges to be assessed for
noncompliance with applicable building codes.
(b) In exercising powers and duties under this article, the
primary goal of the board of directors shall be to make the
Association financially sound.
SECTION 4. Section 8, Article 21.49, Insurance Code, is
amended to read as follows:
Sec. 8. RATES, RATING PLANS AND RATE RULES APPLICABLE. (a)
The Association shall file with the Commissioner for approval the
proposed rates and supplemental rate information to be used in
connection with the issuance of policies or endorsements. Rates
shall be reasonable, adequate, not unfairly discriminatory, and
nonconfiscatory as to any class of insurer. In determining rates,
the Association and the Commissioner shall use methods based on
sound actuarial principles comparable to the methods used by
insurers in the voluntary market [every manual of classifications,
rules, rates which shall include condition charges, every rating
plan, and every modification of any of the foregoing which it
proposes to use]. Every such filing shall indicate the character
and the extent of the coverage contemplated and shall be
accompanied by the policies and endorsements forms proposed to be
used, which said forms and endorsements may be designed
specifically for use by the Association and without regard to other
forms filed with, approved by, or promulgated by the department
[Board] for use in this State. The Association may make
recommendations to the Commissioner that would result in a
reduction of coverages or an increase in an applicable deductible
if any resultant reduction in coverages or increase in deductibles
is accompanied by proposed rate credits. After notice and a
hearing, if a hearing is requested by any person not later than the
10th day after the date of the notice, the Commissioner may accept,
modify, or reject a recommendation made by the Association under
this subsection. Chapter 40 [Article 1.33B] of this code does not
apply to an action taken under this subsection. If the Commissioner
modifies or rejects a proposed rate recommended under this
subsection, the Commissioner shall make specific written findings
as to how the proposed rate fails to comply with the standards of
this Act.
(b) [(c)] Any filing made by the Association pursuant
hereto shall be submitted to the department [Board] and as soon as
reasonably possible after the filing has been made the commissioner
[Board] shall, in writing, approve, modify, or disapprove the same;
provided that any filing shall be determined approved unless
modified or disapproved within 30 days after date of filing.
(c) [(d)] If at any time the commissioner [Board] finds that
a filing so approved no longer meets the requirements of this Act,
the commissioner [it] may, after 10 days' notice and a hearing if a
hearing is requested by any person not later than the 10th day after
the date of the notice [held on not less than 20 days' notice to the
Association specifying the matters to be considered at such
hearing], issue an order withdrawing [its] approval [thereof].
Said order shall specify in what respects the commissioner [Board]
finds that such filing no longer meets the requirements of this Act
and shall be effective not less than 30 days after its issuance.
(d) [(e) All rates shall be made in accordance with the
following provisions:
[(1) Due consideration shall be given to the past and
prospective loss experience within and outside the State of hazards
for which insurance is made available through the plan of
operation, if any, to expenses of operation including acquisition
costs, to a reasonable margin for profit and contingencies, and to
all other relevant factors, within and outside the State.
[(2) Risks may be grouped by classifications for the
establishment of rates and minimum premiums. Classification rates
may be modified to produce rates for individual risks in accordance
with rating plans which establish standards for measuring
variations in such risks on the basis of any or all of the factors
mentioned in the preceding paragraph. Such rates may include rules
for classification of risks insured hereunder and rate
modifications thereof. All such provisions, however, as respects
rates, classifications, standards and premiums shall be without
prejudice to or prohibition of provision by the Association for
consent rates on individual risks if the rate and risk are
acceptable to the Association and as is similarly provided for, or
as is provided for, in Article 5.26(a), Texas Insurance Code, and
this provision or exception on consent rates is irrespective of
whether or not any such risk would otherwise be subject to or the
subject of a provision of rate classification or eligibility.
[(3) Rates shall be reasonable, adequate, not unfairly
discriminatory, and nonconfiscatory as to any class of insurer.
[(4)] Commissions paid to agents shall be reasonable,
adequate, not unfairly discriminatory and nonconfiscatory.
(e) [(f)] For the purpose of this Act the applicant under
Section 6(a) hereof shall be considered to have consented to the
appropriate rates and classifications authorized by this Act
irrespective of any and all other rates or classifications.
(f) [(g)] All premiums written and losses paid under this
Act as appropriate shall be included in applicable classifications
for general rate making purposes.
(g)(1) [(h)(1)] Each rate established by the commissioner
in accordance with this section must be uniform throughout the
first tier of coastal counties.
(2) Not later than August 15 of each year, the
Association shall file with the department for approval by the
commissioner a proposed manual rate for all types and classes of
risks written by the Association. [Chapter 40 of this code does not
apply to a filing made under this subsection or a department action
with respect to the filing.]
(3) Before approving or disapproving a filing, or
modifying a filing, the commissioner shall provide all interested
persons a reasonable opportunity to review the filing, obtain
copies of the filing on payment of any legally required copying
cost, and submit to the commissioner written comments or
information related to the filing.
(4) If requested, the [The] commissioner shall
schedule an open meeting not later than the 45th day after the date
on which the department receives the filing at which interested
persons may present written or oral comments relating to the
filing. An open meeting under this subdivision is subject to
Chapter 551, Government Code, but is not a contested case hearing
under Chapter 2001, Government Code.
(5) The department shall file with the Texas Register
notice that a filing has been made under Subdivision (2) of this
subsection not later than the seventh day after the date the filing
is received by the department. The notice must include information
relating to:
(A) the availability of the filing for public
inspection at the department during regular business hours and the
procedures for obtaining copies of the filing;
(B) procedures for making written comments
related to the filing; and
(C) the time, place, and date of the open meeting
scheduled under Subdivision (4) of this subsection at which an
interested person may submit either written or oral comments
relating to the filing.
(6) After the conclusion of the open meeting, the
commissioner shall approve or disapprove or modify the filing in
writing on or before November 15 of the year in which the filing is
made or the filing is deemed approved. If the commissioner
disapproves a filing, the commissioner shall state in writing the
reasons for the disapproval and the criteria to be met by the
Association to obtain approval. The Association may file with the
commissioner, not later than 30 days after the date on which the
Association receives the commissioner's written disapproval, an
amended filing bringing the filing into conformity with all
criteria stated in the commissioner's written disapproval.
(7) Before approving or disapproving an amended
filing, the commissioner shall provide all interested persons a
reasonable opportunity to review the amended filing, obtain copies
of the amended filing on payment of any legally required copying
cost, and submit to the commissioner written comments or
information related to the amended filing in the manner provided by
Subdivision (3) of this subsection[, and may hold a hearing not
later than the 20th day after the date on which the department
receives the amended filing in the manner provided by Subdivision
(4) of this subsection. Not later than the 10th day after the date
on which the hearing on the amended filing is concluded, the
commissioner shall approve or disapprove the amended filing].
Within 30 days after the amended filing is received, the
commissioner shall approve without changes, approve as modified by
the commissioner, or disapprove an amended filing or it is deemed
approved. [The requirements imposed under Subdivisions (5) and (6)
of this subsection apply to a hearing conducted under this
subdivision.]
(8) In conjunction with the review of a filing or
amended filing, the commissioner may request the Association to
provide additional supporting information relating to the filing or
amended filing, and any interested person may file a written
request with the commissioner for additional supporting
information relating to the filing or amended filing. A request
under this subdivision must be reasonable and must be directly
related to the filing or amended filing. The commissioner shall
submit to the Association all requests for additional supporting
information made under this subdivision for the commissioner's use
and the use of any interested person. Unless a different period is
requested by the Association and approved by the commissioner, the
Association shall provide the information to the commissioner not
later than the fifth day after the date on which the written request
for additional supporting information is delivered to the
Association. The department shall notify an interested person who
has requested additional information of the availability of the
information not later than one business day after the date on which
the commissioner receives the information from the Association.
(9) A rate established and authorized by the
commissioner under this subsection may not reflect an average rate
change that is more than 10 percent higher or lower than the rate
for commercial or 10 percent higher or lower than the rate for
noncommercial windstorm and hail insurance in effect on the date
the filing is made. The rate may not reflect a rate change for an
individual rating class that is 15 percent higher or lower than the
rate for that individual class in effect on the date the filing is
made. The commissioner may[, after notice and hearing,] suspend
this subdivision upon a finding that a catastrophe loss or series of
occurrences resulting in losses in the catastrophe area justify a
need to assure rate adequacy in the catastrophe area and also
justify a need to assure availability of insurance outside the
catastrophe area.
(10) If valid flood or rising water insurance coverage
exists and is maintained on any risk being insured in the pool, the
commissioner may provide for a rate and reduction in rate of premium
as may be appropriate.
(11) [The catastrophe element used to develop rates
under this Act applicable to risks written by the Association shall
be uniform throughout the seacoast territory. The catastrophe
element of the rates must be developed using:
[(A) 90 percent of both the monoline extended
coverage loss experience and related premium income for all
insurers, other than the Association, for covered property located
in the seacoast territory using not less than the most recent 30
years of experience available; and
[(B) 100 percent of both the loss experience and
related premium income for the Association for covered property
using not less than the most recent 30 years of experience
available.
[(12) The noncatastrophe element of the noncommercial
rates must be developed using:
[(A) 90 percent of both the monoline extended
coverage loss experience and related premium income for all
insurers, other than the Association, for covered property located
in the catastrophe area of the seacoast territory using the most
recent 10 years of experience available; and
[(B) 100 percent of both the loss experience and
related premium income for the Association for covered property
using the most recent 10 years of experience available.
[(13) The noncatastrophe element of the commercial
rates must be developed using 100 percent of both the loss
experience and related premium income for the Association for
covered property using the most recent 10 years of experience
available.
[(14) Surcharges collected in the past and used in the
development of current rates may not be excluded from future rate
development as long as those surcharges were collected during the
experience period considered by the commissioner.
[(15)] Not earlier than March 31 of the year before the
year in which a filing is to be made, the department shall value the
loss and loss adjustment expense data to be used for the filing.
(12) [(16)] Not later than June 1 of each year, the
department shall provide the experience data to be used in
establishing the rates under this subsection in that year to the
Association and other interested persons. On request from the
department, an insurer shall provide the data to the department or
the department may obtain the data from a designated statistical
agent, as defined by Section 38.201 of this code.
(13) [(17)] The association may purchase [shall
either establish a] reinsurance as part of its annual operating
expenses to the extent [program] approved by the commissioner and
may [Texas Department of Insurance or] make payments into the
catastrophe reserve trust fund established under Subsection (h)
[(i)] of this section. With the approval of the commissioner [Texas
Department of Insurance], the association may use [establish a]
reinsurance [program] that operates in addition to or in concert
with the catastrophe reserve trust fund established under
Subsection (h) [(i)] of this section and with assessments
authorized by this Act.
(h)(1) [(i)(1)] The commissioner shall adopt rules under
which the association relinquishes its [members relinquish their]
net equity on an annual basis as provided by those rules by making
payments to a fund known as the catastrophe reserve trust fund to
fund the obligations of that fund under Section 19 [19(a)] of this
Act and to fund the mitigation and preparedness plan established
under this subsection to reduce the potential for payments by
members of the association giving rise to tax credits in the event
of loss or losses. Until disbursements are made as provided by this
Act and rules adopted by the commissioner, all money, including
investment income, deposited in the catastrophe reserve trust fund
are state funds to be held by the comptroller outside the state
treasury on behalf of, and with legal title in, the department. The
fund may be terminated only by law. On termination of the fund, all
assets of the fund revert to the state to be used to provide funding
for the annual loss mitigation and preparedness plan developed and
implemented by the commissioner under Subdivision (5) of this
subsection.
(2) The catastrophe reserve trust fund shall be kept
and maintained by the department [Texas Department of Insurance]
pursuant to this Act and rules adopted by the commissioner. The
comptroller, as custodian, shall administer the funds strictly and
solely as provided by this Act and the commissioner's rules.
(3) At the end of either each calendar year or policy
year, the association shall pay the net gain from operations of the
Association [equity of a member], including all premium and other
revenue of the association in excess of incurred losses and
operating expenses, including the cost of any reinsurance, to the
catastrophe reserve trust fund as established under this subsection
[or a reinsurance program approved by the commissioner].
(4) The commissioner's rules shall establish the
procedure relating to the disbursement of money from the
catastrophe reserve trust fund [to policyholders in the event of an
occurrence or series of occurrences within the defined catastrophe
area that results in a disbursement under Section 19(a) of this
Act]. The rules may provide that money from the catastrophe reserve
trust fund may be used to purchase reinsurance to protect the fund
or to reimburse the Association for the payment of policyholder
claims. Reinsurance purchases, if any, must be included in the
reinsurance approved under Subsection (g)(13) of this section.
(5) Each state fiscal year, beginning with fiscal year
2002, the department may use from the investment income of the fund
an amount equal to not less than $1 million and not more than 10
percent of the investment income of the prior fiscal year to provide
funding for an annual mitigation and preparedness plan to be
developed and implemented each year by the commissioner. From that
amount and as part of that plan, the department may use in each
fiscal year $1 million for the windstorm inspection program
established under Section 6A of this Act. The mitigation and
preparedness plan shall provide for steps to be taken in the
seacoast territory by the commissioner or by a local government,
state agency, educational institution, or nonprofit organization
designated by the commissioner in the plan, to implement programs
intended to improve preparedness for windstorm and hail
catastrophes, reduce potential losses in the event of such a
catastrophe, provide research into the means to reduce those
losses, educate or inform the public in determining the
appropriateness of particular upgrades to structures, or protect
infrastructure from potential damage from those catastrophes.
Money in excess of $1 million is not available for use under this
subsection if the commissioner determines that an expenditure of
investment income from the fund would jeopardize the actuarial
soundness of the fund or materially impair the ability of the fund
to serve the state purposes for which it was established.
SECTION 5. (a) The board of directors of the Texas
Windstorm Insurance Association established under Section 5,
Article 21.49, Insurance Code, as that section existed prior to
amendment by this Act, is abolished effective January 1, 2006.
(b) Not later than December 31, 2005, the commissioner of
insurance shall appoint the members of the board of directors of the
Texas Windstorm Insurance Association under Section 5, Article
21.49, Insurance Code, as amended by this Act.
(c) The term of a person who is serving as a member of the
board of directors of the Texas Windstorm Insurance Association
immediately before the abolition of that board under Subsection (a)
of this section expires on January 1, 2006. Such a person is
eligible for appointment by the commissioner of insurance to the
new board of directors of the Texas Windstorm Insurance Association
under Section 5, Article 21.49, Insurance Code, as amended by this
Act.
SECTION 6. This Act takes effect January 1, 2006.