2005S0374-1 02/25/05
By: Fraser S.B. No. 780
A BILL TO BE ENTITLED
AN ACT
relating to a revenue bond program for the Texas Windstorm
Insurance Association.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Article 21.49, Insurance Code, is amended by
adding Section 20 to read as follows:
Sec. 20. REVENUE BOND PROGRAM. (a) 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
Association in certain designated portions of the state is for the
benefit of the public and in furtherance of a public purpose.
(b) 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) "Insurer" means all property and casualty insurers
authorized to transact property and casualty insurance in this
state, including county mutual companies, Lloyd's plans, and
reciprocal or interinsurance exchanges.
(4) "Public security resolution" means the resolution
or order authorizing public securities to be issued under this
section.
(c)(1) At the request of the Association and with the
approval of the Commissioner, the Texas Public Finance Authority
shall issue public securities to:
(A) fund the Association, for purposes
including:
(i) to establish and maintain reserves to
pay claims;
(ii) to pay incurred claims and operating
expenses; and
(iii) to purchase reinsurance;
(B) pay costs related to the issuance of the
public securities; and
(C) pay other costs related to the public
securities as may be determined by the board.
(2) To the extent not inconsistent with this section,
Chapter 1232, Government Code, applies to public securities issued
under this section. In the event of a conflict, this section
controls.
(d) The following laws 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.
(e) The Texas Public Finance Authority may issue, on behalf
of the Association, public securities in a total amount not to
exceed $2 billion.
(f)(1) Public securities issued under this section may be
issued at public or private sale.
(2) Public securities may mature not more than 10
years after the date issued.
(3) Public securities must be issued in the name of the
Association.
(g) In a public security resolution, the board may make
additional covenants with respect to the public securities and the
designated income and receipts of the Association pledged to their
payment, and may provide for the flow of funds and the
establishment, maintenance, and investment of funds and accounts
with respect to the public securities.
(h)(1) Funds generated through the issuance of public
securities shall be held outside the state treasury in the custody
of the comptroller.
(2) The Association may request disbursement of the
funds for the purposes set forth in Subsection (c)(1) of this
section.
(i)(1) A public security resolution may establish special
accounts, including an interest and sinking fund account, reserve
account, and other accounts.
(2) The Association shall administer the accounts in
accordance with this article.
(j)(1) Public securities are payable only from the service
fee established under Subsection (k) of this section or other
amounts that the Association is authorized to levy, charge, and
collect.
(2) Public securities are obligations solely of the
Association. Public securities do not create a pledging, giving,
or lending of the faith, credit, or taxing authority of this state.
(3) Each public security must include a statement that
the 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.
(4) 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.
(k)(1) A service fee may be assessed against:
(A) insurers;
(B) the Association; and
(C) the FAIR Plan Association.
(2) The service fee shall be set by the commissioner
annually in an amount sufficient to pay all debt service on the
public securities. The service fee shall be paid by each insurer,
the Association, and the FAIR Plan Association as required by the
commissioner. The amount of the insurer's service fee shall be
based on the amount of the insurer's gross written premiums for all
property and casualty lines, excluding workers' compensation,
accident and health, and medical malpractice, as reported in the
annual statement filed with the department for the calendar year
immediately preceding the year in which the assessment is made.
(3) The Association shall collect the service fee and
report collection of the service fee to the department.
(4) The department may audit payment and collection of
the service fee.
(5) As a condition of engaging in the business of
insurance in this state, an insurer agrees that if the company
leaves the property and casualty insurance market in this state the
insurer remains obligated to pay, until the public securities are
retired, the insurer's share of the service fee assessed under this
section in an amount proportionate to that insurer's share of the
property and casualty insurance market, not including workers'
compensation, accident and health, and medical malpractice lines of
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. The proportion assessed against
the insurer shall be based on the insurer's gross written premiums
for property and casualty insurance, not including workers'
compensation, accident and health, and medical malpractice lines of
insurance, for the insurer's last reporting period.
(l)(1) The Association shall deposit all service fees
collected from insurers, the FAIR Plan Association, and the
Association 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.
(2) 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 service
fee 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.
(m) Revenue collected from the service fee in any year that
exceeds the amount of the bond obligations and bond administrative
expenses payable in that year and interest earned on the service fee
may, in the discretion of the Association with the approval of the
commissioner, be:
(1) used to pay bond obligations payable in the
subsequent year, offsetting the amount of the service fee that
would otherwise have to be levied for the year under this section;
or
(2) used to redeem or purchase outstanding bonds.
(n)(1) Those insurers in this state, including the FAIR Plan
Association, that have paid a service fee under this section may
charge a premium surcharge on every property and casualty insurance
policy, except workers' compensation, accident and health, and
medical malpractice insurance, issued by such insurer or the FAIR
Plan Association, the effective date of which policy is within the
one year period commencing 90 days after the date of payment of a
service fee. The amount of the premium surcharge shall be
calculated on the basis of a uniform percentage of the premium on
such policies, such that the aggregate of all such surcharges by
such insurer shall be equal to and not exceed the amount of the
service fee paid by the insurer.
(2) The Association shall submit a plan for collection
of a premium surcharge from policyholders of the Association to the
department for approval by the commissioner.
(o) 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 the state or a political subdivision of this state.
(p) 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.
(q) 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.
(r) 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 section, the Texas
Constitution, or a public security resolution.
SECTION 2. This Act takes effect September 1, 2005.