By: Smithee, Escobar H.B. No. 1890
A BILL TO BE ENTITLED
AN ACT
relating to the operation and funding of the Texas Windstorm
Insurance Association, including funding of coverage for certain
catastrophic events through the establishment of a revenue bond
program.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
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) five representatives of different insurers who are
members of the Association [who shall be elected by members as
provided in the plan of operation];
(2) two representatives of the general public, one of
whom is a resident of a first tier coastal county and one of whom is
a resident of a county other than a first tier coastal county
[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) two insurance [local recording] agents licensed
under this Code, one with a [demonstrated experience in the
Association, and whose] principal office [offices], as of the date
of the appointment, [are] located in a first tier coastal county and
one with a principal office located in a county other than a first
tier coastal county [catastrophe area].
(h) Members of the board of directors of the Association
serve 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; and
(B) applicable deductibles.
(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. Section 19, Article 21.49, Insurance Code, is
amended to read as follows:
Sec. 19. PAYMENT OF LOSSES; PREMIUM TAX CREDIT. (a) If, in
any calendar year, an occurrence or series of occurrences within
the defined catastrophe area results in insured losses and
operating expenses of the association in excess of premium and
other revenue of the association, any excess losses shall be paid as
provided by this section.
(b) After application of available revenue to losses,
[follows:
[(1)] $100 million, per catastrophic event, shall be
assessed to the members of the association with the proportion of
the loss allocable to each insurer determined in the same manner as
its participation in the association has been determined for the
year under Section 5(b) [5(c)] of this Act. A member of the
association may not directly or indirectly recover the amount of
any assessment made under this subsection from additional premium
charges on any insurance policy written on property that is not
located within the first tier coastal counties.
(c) Any losses that exceed the amounts available under
Subsection (b) of this section, but not to exceed an additional $300
million, per catastrophic event, shall be funded through public
securities issued, without regard to whether an occurrence or
series of occurrences within a defined catastrophe area has
occurred, under the revenue bond program established under Section
20 of this Act.[;]
(d) Any [(2) any] losses in excess of the amounts
authorized under Subsections (b) and (c) of this section [$100
million] shall be paid from the catastrophe reserve trust fund
established under Section 8(h) [8(i)] of this Act, not to exceed an
amount equal to 50 percent of the balance of that fund.
(e) If the amount available under Subsection (d) of this
section is insufficient to pay the excess losses, an additional
amount not to exceed $500 million shall be funded through the
issuance of additional public securities under the revenue bond
program established under Section 20 of this Act.
(f) If the amount available under Subsection (e) of this
section is insufficient to pay the excess losses, reinsurance
proceeds recoverable by the association and available under [and]
any reinsurance program established by the association shall be
used to pay the losses.
(g) Any [;
[(3) for losses in excess of those paid under
Subdivisions (1) and (2) of this subsection, an additional $200
million shall be assessed to the members of the association with the
proportion of the loss allocable to each insurer determined in the
same manner as its participation in the association has been
determined for the year under Section 5(c) of this Act;
[(4) any] losses in excess of those paid under
Subsections (b)-(f) [Subdivisions (1), (2), and (3)] of this
section [subsection] shall be assessed against members of the
association, with the proportion of the total loss allocable to
each insurer determined in the same manner as its participation in
the association has been determined for the year under Section 5(b)
[5(c)] of this Act.
(h) [(b)] An insurer may credit any amount paid in
accordance with Subsection (g) [(a)(4)] of this section in a
calendar year against its premium tax under Section 221.002
[Article 4.10] of this code. The tax credit herein authorized shall
be allowed at a rate not to exceed 20 percent per year for five or
more successive years following the year of payment of the claims.
The balance of payments paid by the insurer and not claimed as such
tax credit may be reflected in the books and records of the insurer
as an admitted asset of the insurer for all purposes, including
exhibition in annual statements pursuant to Section 862.001
[Article 6.12] of this code.
(i) The commissioner may adopt rules as necessary to
implement this section.
SECTION 6. Article 21.49, Insurance Code, is amended by
adding Section 20 to read as follows:
Sec. 20. REVENUE BOND PROGRAM FOR OPERATIONS AND PAYMENT OF
CLAIMS. (a) In this section:
(1) "Board" means the board of directors of the Texas
Public Finance Authority.
(2) "Bond" means any debt instrument or public
security issued by the Texas Public Finance Authority.
(3) "Public security resolution" means the resolution
or order authorizing public securities to be issued under this
section.
(b) The legislature finds that the issuance of public
securities to provide a method to raise funds to provide windstorm,
hail, and fire insurance through the Texas Windstorm Insurance
Association in certain designated portions of the state is for the
benefit of the public and in furtherance of a public purpose.
(c) At the request of the association and with the approval
of the commissioner, the Texas Public Finance Authority shall
issue, on behalf of the association, public securities in a total
amount not to exceed $800 million in accordance with Subsections
(d) and (e) of this section.
(d) Without regard to whether an occurrence or series of
occurrences within the defined catastrophe area has occurred, the
board shall issue public securities equal to the amount specified
under Section 19(c) of this Act.
(e) After an occurrence or series of occurrences within the
defined catastrophe area has occurred, the board shall issue public
securities in an amount not to exceed the amount specified under
Section 19(e) of this Act as necessary to fund the payment of excess
losses under that subsection.
(f) Public securities issued under this section shall be
used to:
(1) fund the association, including funding necessary
to:
(A) establish and maintain reserves to pay
claims;
(B) pay incurred and future claims; and
(C) pay operating expenses;
(2) pay costs related to the issuance of the public
securities; and
(3) pay other costs related to the public securities
as may be determined by the board.
(g) To the extent consistent with this section, Chapter
1232, Government Code, applies to public securities issued under
this section. In the event of a conflict, this section controls.
The following laws also apply to public securities issued under
this section to the extent consistent with this section:
(1) Chapters 1201, 1202, 1204, 1205, 1231, and 1371,
Government Code; and
(2) Subchapter A, Chapter 1206, Government Code.
(h) Public securities issued under this section:
(1) may be issued at public or private sale; and
(2) must:
(A) be issued in the name of the association; and
(B) mature not more than 10 years after the date
issued.
(i) In a public security resolution, the board may:
(1) make additional covenants with respect to the
public securities and the designated income and receipts of the
association pledged to the payment of the public securities; and
(2) provide for the flow of funds and the
establishment, maintenance, and investment of funds and accounts
with respect to the public securities.
(j) Funds generated through the issuance of public
securities shall be held outside the state treasury in the custody
of the comptroller. The association may request disbursement of
the funds for the purposes set forth in Subsection (f) of this
section.
(k) A public security resolution may establish special
accounts, including an interest and sinking fund account, reserve
account, and other accounts. The association shall administer the
accounts in accordance with this section.
(l) Public securities are payable only from the premium
surcharges established under Subsection (m) or (n) of this section,
as applicable, or from other amounts that the association is
authorized to levy, charge, and collect. Public securities are
obligations solely of the association and do not create a pledging,
giving, or lending of the faith, credit, or taxing authority of this
state. Each public security must include a statement that this
state is not obligated to pay any amount on the public security and
that the faith, credit, and taxing authority of this state are not
pledged, given, or lent to those payments. Each public security
issued under this section must state on its face that the public
security is payable solely from the revenues pledged for that
purpose and that the public security does not and may not constitute
a legal or moral obligation of the state.
(m) The public securities and all debt service on the public
securities issued in accordance with Subsection (d) shall be paid
by premium surcharges in an amount approved by the commissioner and
applied to insurance policies written through the association in
the first tier coastal counties.
(n) The public securities and all debt service on the public
securities issued in accordance with Subsection (e) shall be paid
by premium surcharges in amounts approved by the commissioner and
applied to each property and casualty insurance policy written by
an insurer in this state or by the FAIR Plan Association. The
premium surcharges applicable under this subsection to insurance
policies written on property located in first tier coastal
counties, including policies issued through the association must be
equal to two times the premium surcharges applicable to insurance
policies written on property located in counties that are not first
tier coastal counties. A premium surcharge under this subsection
may not be applied to a workers' compensation insurance policy, an
accident and health insurance policy, or a medical malpractice
insurance policy.
(o) As a condition of engaging in the business of insurance
in this state, an insurer that engages in the business of property
insurance in this state agrees that if the insurer leaves the
insurance market in this state the insurer remains obligated to
pay, until the public securities are retired, the insurer's share
of the premium surcharges assessed under Subsection (m) or (n) of
this section, as applicable, in an amount proportionate to that
insurer's share of the insurance market 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. The
proportion assessed against the insurer shall be based on the
insurer's gross written premiums for insurance for the insurer's
last reporting period.
(p) The association shall deposit all premium surcharges
collected under Subsection (m) or (n) of this section, as
applicable, in a fund to be held outside the state treasury in the
custody of the comptroller. Money deposited in the fund may be
invested as permitted by general law. Money in the fund required to
be used to pay bond obligations and bond administrative expenses
shall be transferred to the Texas Public Finance Authority or used
by the comptroller in the manner and at the time specified in the
resolution adopted in connection with the bond issue to ensure
timely payment of obligations and expenses, or as otherwise
provided by the bond documents. For bonds issued by the Texas
Public Finance Authority for the association, the association shall
provide for the payment of the bond obligations and the bond
administrative expenses by irrevocably pledging revenues received
from the premium surcharges and amounts on deposit in the fund,
together with any bond reserve fund, as provided in the proceedings
authorizing the bonds and related credit agreements.
(q) Revenue collected from the premium surcharges assessed
under Subsection (m) or (n) of this section, as applicable, in any
year that exceeds the amount of the bond obligations and bond
administrative expenses payable in that year and interest earned on
the premium surcharges may, in the discretion of the association
and with the approval of the commissioner, be used to:
(1) pay bond obligations payable in the subsequent
year, offsetting the amount that would otherwise have to be levied
for the year under this section; or
(2) redeem or purchase outstanding bonds.
(r) The public securities issued under this section, any
interest from those public securities, and all assets pledged to
secure the payment of the public securities are free from taxation
by this state or a political subdivision of this state.
(s) The public securities issued under this section
constitute authorized investments under Articles 2.10 and 3.33 and
Subpart A, Part I, Article 3.39, of this code.
(t) The state pledges to and agrees with the owners of any
public securities issued in accordance with this section 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
public securities or in any way impair the rights and remedies of
those owners until the public securities, bond premium, if any, 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. The association may include this pledge and agreement
of the state in any agreement with the owners of the public
securities.
(u) A party at interest may use mandamus and all other legal
and equitable remedies to require the association and any other
party to carry out agreements and to perform functions and duties
established under this section, the Texas Constitution, or a public
security resolution.
(v) This section expires September 1, 2011.
SECTION 7. (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 8. This Act takes effect January 1, 2006.