79R6477 AJA-F
By: Seaman H.B. No. 1744
A BILL TO BE ENTITLED
AN ACT
relating to the operation of the Fair Access to Insurance
Requirements (FAIR) Plan Association.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 1, Article 21.49A, Insurance Code, is
amended by amending Subsections (a) and (b) to read as follows:
(a) If the commissioner determines, after a public hearing,
that in all or any part of the state residential property insurance
is not reasonably available in the voluntary market to a
substantial number of insurable risks or [and] that at least 25
percent of the applicants to the residential property market
assistance program who are qualified under the plan of operation
have not been placed with an insurer in the previous six-month
period, the commissioner may establish a FAIR (Fair Access to
Insurance Requirements) Plan to deliver residential property
insurance to citizens of this state in underserved areas, which
shall be determined and designated by the commissioner by rule.
(b) Except as provided by this subsection, each [Each]
insurer, as defined herein, as a condition of its authority to
transact residential property insurance in this state, shall
participate in the FAIR Plan Association in accordance with this
Act. The Texas Windstorm Insurance Association established by
Article 21.49 of this code may not participate in the FAIR Plan
Association for any purpose.
SECTION 2. Section 3, Article 21.49A, Insurance Code, is
amended by amending Subsections (b), (d), and (e) and adding
Subsections (f) and (g) to read as follows:
(b) The governing committee shall be composed of 11 members
appointed by the commissioner as follows:
(1) five members who represent the interests of
insurers;
(2) four public members who reside in this state; and
(3) two members who are licensed general property and
casualty [local recording] agents.
(d) To be eligible to serve on the governing committee as a
representative of insurers, a person must be a full-time employee
of an authorized insurer that is a member of the association. A
member of the governing committee may be removed by the
commissioner without cause and replaced in accordance with
Subsection (b) of this section.
(e) The plan of operation shall provide:
(1) for establishment of a FAIR Plan Association for
the issuing of residential property insurance pursuant to this Act
and the distribution of the losses and the expenses in the writing
of such insurance in this state;
(2) that all insurers licensed to write property
insurance and writing residential property insurance shall
participate in the assessments [writings, expenses, and losses] of
the association, in the proportion that the net direct premiums, of
each participating insurer, written in this state during the
preceding calendar year, bear to the aggregate net direct premium
written in this state by all participating insurers; such
information shall be determined in accordance with the residential
property statistical plan adopted by the commissioner;
(3) that a participating insurer is entitled to
receive credit for similar insurance voluntarily written in a
designated underserved area and its participation in the
assessments of [writings in] the association shall be reduced in
accordance with the provisions of the plan of operation;
(4) for the immediate binding of eligible risks; for
the use of premium installment payment plans, adequate marketing,
and service facilities; and for the establishment of reasonable
service standards;
(5) procedures for efficient, economical, fair, and
nondiscriminatory administration of the FAIR Plan Association;
(6) procedures for determining the net level of
participation required for each insurer in the FAIR Plan
Association;
(7) for the use of deductibles and other underwriting
devices and for assessment of all members in amounts sufficient to
operate the association; and establish maximum limits of liability
to be placed through the program; and commissions to be paid to the
licensed agents submitting applications;
(8) that the association issue policies in its own
name;
(9) reasonable underwriting standards for determining
insurability of the risk;
(10) procedures for the assumption and ceding of
reinsurance by the association; and
(11) any other procedures or operational matters
deemed necessary by the governing committee or the commissioner.
(f) Notwithstanding Chapter 551, Government Code, or any
other law, members of the governing committee may meet by telephone
conference call, video conference, or other similar
telecommunication method. The governing committee may use
telephone conference call, video conference, or other similar
telecommunication method for purposes of establishing a quorum or
voting or for any other meeting purpose in accordance with this
subsection and Subsection (g) of this section. This subsection
applies without regard to the subject matter discussed or
considered by the members of the governing committee at the
meeting.
(g) A meeting held by telephone conference call, video
conference, or other similar telecommunication method:
(1) is subject to the notice requirements applicable
to other meetings of the governing committee;
(2) may not be held unless notice of the meeting
specifies the location of the meeting at which at least one member
of the governing committee is physically present;
(3) must be audible to the public at the location
specified in the notice under Subdivision (2) of this subsection;
and
(4) must provide two-way audio communication between
all members of the governing committee attending the meeting during
the entire meeting, and if the two-way audio communication link
with members attending the meeting is disrupted so that a quorum of
the governing committee is no longer participating in the meeting,
the meeting may not continue until the two-way audio communication
link is reestablished.
SECTION 3. Section 5(d), Article 21.49A, Insurance Code, is
amended to read as follows:
(d) Each insurer must participate in the assessments
[writings, expenses, and losses] of the association in the
proportion that its net direct premiums written bear to the
aggregate net direct premiums written by all insurers.
SECTION 4. Section 11, Article 21.49A, Insurance Code, is
amended to read as follows:
Sec. 11. ASSESSMENTS AND PREMIUM SURCHARGES. Should a
deficit occur in the association, the association, at the direction
of the commissioner, shall either request the issuance of public
securities as authorized by Article 21.49A-1 of this code or assess
participating insurers in accordance with this section. As
reimbursement for assessments paid under this section or service
fees paid under Article 21.49A-1 of this code, each [Each] insurer
may charge a premium surcharge on every property insurance policy
issued by it insuring property in this state, the effective date of
which policy is within the three-year period commencing 90 days
after the date of assessment by the association under this section
or commencing 90 days after payment of a service fee under Article
21.49A-1 of this code. The amount of the surcharge shall be
calculated on the basis of a uniform percentage of the premium on
such policies equal to one-third of the ratio of the amount of an
insurer's assessment or service fee payment to the amount of its
direct earned premiums as reported in its financial statement to
the department for the calendar year immediately preceding the year
in which the assessment is made, such that over the period of three
years the aggregate of all such surcharges by an insurer shall be at
least equal to the amount of the assessment or service fee payment
of such insurer. The amount of any assessment paid and surcharged
under this section may be carried by the member insurer as an
admitted asset of the insurer for all purposes, including
exhibition in annual statements under Section 862.001 of this code,
until collected. The commissioner shall adopt rules and procedures
as necessary to implement this section. [The minimum surcharges on
a policy may be $1; all surcharges may be rounded to the nearest
dollar.]
SECTION 5. Article 21.49A, Insurance Code, is amended by
adding Section 16 to read as follows:
Sec. 16. ASSETS OF ASSOCIATION. On dissolution of the
association, all assets of the association shall be deposited in
the general revenue fund.
SECTION 6. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2005.