80R6247 PB-D

By: Eiland H.B. No. 1865

A BILL TO BE ENTITLED

AN ACT

relating to the operation of the Texas Windstorm Insurance Association.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 2210.005, Insurance Code, is amended to read as follows:

Sec. 2210.005. DESIGNATION AS CATASTROPHE AREA OR INADEQUATE FIRE INSURANCE AREA; REVOCATION OF DESIGNATION. (a) After at least 10 days' notice and a hearing, if a hearing is requested by any person within the 10-day notice period, the commissioner may designate an area of this state as a catastrophe area if the commissioner determines that windstorm and hail insurance is not reasonably available to a substantial number of the owners of insurable property located in that territory because the territory is subject to unusually frequent and severe damage resulting from windstorms or hailstorms.

(b) After at least 10 days' notice and a hearing, if a hearing is requested by any person within the 10-day notice period, the commissioner may designate an area of this state as an inadequate fire insurance area if the commissioner determines that fire and explosion insurance is not reasonably available to a substantial number of owners of insurable property located in that area.

(c) The commissioner shall revoke a designation made under Subsection (a) or (b) if the commissioner determines, after at least 10 days' notice and a hearing, if a hearing is requested by any person within the 10-day notice period, that the applicable insurance coverage is no longer reasonably unavailable to a substantial number of owners of insurable property within the designated territory.

(d) If the association determines that windstorm and hail insurance or fire and explosion insurance is no longer reasonably unavailable to a substantial number of owners of insurable property in a territory designated as a catastrophe area or inadequate fire insurance area, as applicable, the association may request in writing that the commissioner revoke the designation. After at least 10 days' notice and a hearing, if a hearing is requested by any person within the 10-day notice period, but not later than the 30th day after the date of the hearing or the expiration of the notice period if a hearing is not requested, the commissioner shall:

(1) approve the request and revoke the designation; or

(2) reject the request.

SECTION 2. Section 2210.008, Insurance Code, is amended to read as follows:

Sec. 2210.008. DEPARTMENT ORDERS. (a) After notice and an opportunity for a hearing as provided by Subsection (b), the commissioner may issue any orders that the commissioner considers necessary to implement this chapter [, including orders] regarding maximum rates, competitive rates, and policy forms.

(b) Before the commissioner adopts an order under Subsection (a), the department shall post notice of the [hearing on the] order at the secretary of state's office in Austin and shall hold a hearing to consider the proposed order if a hearing is requested by any person not later than the 10th day after the date on which the notice is posted. Any person may appear at such a [the] hearing and testify for or against the adoption of the order.

SECTION 3. Sections 2210.052(a) and (d), Insurance Code, are amended to read as follows:

(a) Each member of the association shall participate in the assessments [writings, expenses, profits, and losses] of the association in the proportion that the net direct premiums of that member during the preceding calendar year bears to the aggregate net direct premiums by all members of the association, as determined using the information provided under Subsection (b).

(d) Notwithstanding Subsection (a), a member, in accordance with the plan of operation, is entitled to receive credit for similar insurance voluntarily written in an area designated by the commissioner. The member's participation in the assessments [writings] of the association shall be reduced in accordance with the plan of operation.

SECTION 4. Section 2210.056(c), Insurance Code, is amended to read as follows:

(c) On dissolution of the association, all assets of the association revert to this state and shall be deposited in the general revenue fund.

SECTION 5. Section 2210.058, Insurance Code, is amended to read as follows:

Sec. 2210.058. PAYMENT OF EXCESS LOSSES[; PREMIUM TAX CREDIT]. (a) If[, in any calendar year,] an occurrence or series of occurrences, as defined in the plan of operation, in a catastrophe area results in insured losses and operating expenses of the association in excess of premium and other revenue of the association, the excess losses shall be paid as provided by this section.

(b) An amount not to exceed [follows:

[(1)] $100 million for each occurrence shall be assessed against the members of the association and the Texas FAIR Plan Association. The loss allocable to the Texas FAIR Plan Association shall be based on the proportion that the net direct premiums written by the Texas FAIR Plan Association during the preceding calendar year bears to the total net direct premiums written in this state by all members of the association for the same period, as determined under Section 2210.052. The remainder of the assessments shall be allocated to each member insurer in the manner used to determine each insurer's participation in the association for the year under Section 2210.052. Assessments made under this subsection are not reimbursable under Subsection (g).

(c) For each occurrence, any [as provided by Subsection (b);

[(2)] losses in excess of $100 million shall be paid as provided by this subsection from the catastrophe reserve trust fund established under Subchapter J. Not more than 50 percent of the amount in the catastrophe reserve trust fund as of the date of the occurrence, reduced by anticipated payments from prior occurrences, may be used to pay losses under this subsection unless the commissioner determines that a greater percentage should be applied after at least 10 days' notice and a hearing, if a hearing is requested by any person within the 10-day notice period.

(d) Any [and any reinsurance program established by the association;

[(3)for] losses in excess of the amounts determined under Subsections (b) and (c) [those paid under Subdivisions (1) and (2), an additional $200 million] shall be paid in accordance with a plan developed by the association and approved by the commissioner after at least 10 days' notice and a hearing if a hearing is requested by any person within the 10-day notice period, from any or a combination of the following sources:

(1) additional assessments to the members of the association and the Texas FAIR Plan Association, not to exceed $300 million per calendar year, which shall be based on the proportion of the member's or the Texas FAIR Plan Association's net direct premiums for the lines of insurance used to compute member participation in the association's assessments under Section 2210.052 as reported in the association's annual statement filed with the department for the calendar year immediately preceding the year in which the assessment is made, to the total reported net direct premiums for those insurance lines in this state;

(2) any reinsurance proceeds recoverable by the association; and

(3) any proceeds from public securities received by the association under Subchapter M.

(e) Any [assessed against the members of the association, as provided by Subsection (b); and

[(4)] losses of the association that are not [in excess of those] paid by assessments and the catastrophe reserve trust fund as provided by Subsections (b) and (c) or are not paid by the plan approved by the commissioner under Subsection (d) [Subdivisions (1), (2), and (3)] shall be paid from the proceeds from public securities received by the association under Subchapter M [assessed against members of the association, as provided by Subsection (b)].

(f) Assessments under Subsection (d)(1) are reimbursable in accordance with Subsection (g) [(b) The proportion of the losses allocable to each insurer under Subsections (a)(1), (3), and (4) shall be determined in the manner used to determine each insurer's participation in the association for the year under Section 2210.052].

(g) [(c)] An insurer, including the Texas FAIR Plan Association, that has been assessed and has paid the assessments under Subsection (d)(1) may charge a premium surcharge for reimbursement of the assessment. The premium surcharge must be a charge separate from and in addition to premiums collected. The premium surcharge applies to each insurance policy for the lines used to compute the assessment issued by the insurer or the Texas FAIR Plan Association in this state, the effective date of which is within the five-year period beginning on the 90th day after the date of the assessment. The amount of the surcharge shall be computed on the basis of a uniform percentage of the premium on those policies, not to exceed 20 percent per year, of the amount of the assessment, such that over the five-year period the aggregate of all surcharges by the insurer or the Texas FAIR Plan Association equals but does not exceed the amount of the assessment. The amount of an assessment paid and recoverable under this subsection [may credit an amount paid in accordance with Subsection (a)(4) in a calendar year against the insurer's premium tax under Chapter 221. The tax credit authorized under this subsection 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 made by the insurer and not claimed as a premium tax credit] may be reflected in the books and records of the insurer or the Texas FAIR Plan Association as an admitted asset of the insurer for all purposes, including exhibition in an annual statement under Section 862.001.

(h) If losses are paid by the procedures under Subsection (d)(1), the association shall develop and implement a plan for collection of a premium surcharge from policyholders of the association. The premium surcharge must be a charge separate from and in addition to premiums collected. The association shall establish the premium surcharge in an amount at least 100 percent and not more than 150 percent of the average per policy surcharge percentage established under Subsection (g) on any policy issued or renewed by the association. The period for collection of the premium surcharge under this subsection may not exceed five years. Each surcharge collected under this subsection shall be deposited in the catastrophe reserve trust fund.

(i) In addition to the funding described by Subsections (b)-(h), the association may also borrow from, or enter into other financing arrangements with, any market sources at prevailing interest rates.

(j) The commissioner may adopt rules as necessary to implement this section.

SECTION 6. Section 2210.059, Insurance Code, is amended to read as follows:

Sec. 2210.059. NOTIFICATION REGARDING CERTAIN LOSSES [TAX CREDITS]. (a) The association shall immediately notify the department if an occurrence or series of occurrences in a catastrophe area results in insured losses that result in assessments, payments from the trust fund established under Section 2210.452, or claims under a reinsurance contract approved under Section 2210.453 [a tax credit under Section 2210.058(c) in a calendar year].

(b) On receipt of notice under Subsection (a), the department shall immediately notify the governor and the appropriate committees of each house of the legislature of the amount of insured losses eligible for payments using assessment funds, catastrophe reserve trust funds, or reinsurance proceeds [tax credits under Section 2210.058(c)].

SECTION 7. Section 2210.060(c), Insurance Code, is amended to read as follows:

(c) Subsection (a) does not authorize the association to indemnify a member of the association for participating in the assessments made by [writings, expenses, profits, and losses of] the association in the manner provided by this chapter.

SECTION 8. Section 2210.102, Insurance Code, is amended by amending Subsection (a) and by adding Subsection (c) to read as follows:

(a) The board of directors is composed of the following 11 [nine] members appointed by the commissioner:

(1) five members who represent the interests of [representatives of different] insurers who are members of the association [, elected by the members as provided by the plan of operation];

(2) four members who represent the interests of the [two] public, [representatives] who are nominated by the office of public insurance counsel, and who, as of the date of the appointment:

(A) reside in a catastrophe area; and

(B) are policyholders of the association; and

(3) two members who are general property and casualty agents:

(A) who have demonstrated experience in the association; and

(B) whose principal offices, as of the date of the appointment, are located in a catastrophe area.

(c) To be eligible to serve on the board of directors as a representative of insurers, a person must be a full-time employee of an authorized insurer that is a member of the association.

SECTION 9. Section 2210.103, Insurance Code, is amended by amending Subsection (a) and by adding Subsection (c) to read as follows:

(a) Members of the board of directors serve three-year staggered terms, with the terms of three or four members expiring on the third Tuesday of March of each year.

(c) A member of the board of directors serves at the pleasure of the commissioner. The commissioner shall appoint a replacement for a member who leaves or is removed from the board of directors in the manner provided by Section 2210.102.

SECTION 10. Subchapter C, Chapter 2210, Insurance Code, is amended by adding Section 2210.1051 to read as follows:

Sec. 2210.1051. MEETINGS OF BOARD OF DIRECTORS. (a) Notwithstanding Chapter 551, Government Code, or any other law, members of the board of directors may meet by telephone conference call, video conference, or other similar telecommunication method. The board 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 (b). This subsection applies without regard to the subject matter discussed or considered by the members of the board at the meeting.

(b) 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 board of directors;

(2) may not be held unless notice of the meeting specifies the location of the meeting;

(3) must be audible to the public at the location specified in the notice under Subdivision (2); and

(4) must provide two-way audio communication between all members of the board 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 board is no longer participating in the meeting, the meeting may not continue until the two-way audio communication link is reestablished.

SECTION 11. Section 2210.152, Insurance Code, is amended by adding Subsection (c) to read as follows:

(c) The plan of operation may contain provisions allowing the association to change its methods and procedures for doing business in ways that allow the association to implement new technologies designed to make the association up to date and efficient in its operations.

SECTION 12. Section 2210.153(a), Insurance Code, is amended to read as follows:

(a) The association may present a recommendation for a change in the plan of operation to the department [at:

[(1) periodic hearings conducted by the department for that purpose; or

[(2) hearings relating to property and casualty insurance rates].

SECTION 13. Section 2210.202(b), Insurance Code, is amended to read as follows:

(b) A general property and casualty agent must submit an application for the insurance coverage on behalf of the applicant on forms prescribed by the association. [The application must contain a statement as to whether the applicant has submitted or will submit the premium in full from personal funds or, if not, to whom a balance is or will be due.]

SECTION 14. Section 2210.207(e), Insurance Code, is amended to read as follows:

(e) Notwithstanding this chapter or any other law, the commissioner[, after notice and hearing,] may adopt rules to:

(1) authorize the association to provide actual cash value coverage instead of replacement cost coverage on the roof covering of a building insured by the association; and

(2) establish:

(A) the conditions under which the association may provide that actual cash value coverage;

(B) the appropriate premium reductions when coverage for the roof covering is provided on an actual cash value basis; and

(C) the disclosure that must be provided to the policyholder, prominently displayed on the face of the windstorm and hail insurance policy.

SECTION 15. Sections 2210.256(a), (b), (d), and (f), Insurance Code, are amended to read as follows:

(a) After notice and an opportunity for a hearing, the department may revoke an appointment made under Section 2210.254 if the appointee is found to be in violation of this subchapter or a rule of the commissioner adopted under this subchapter.

(b) The commissioner, instead of revocation, may impose sanctions and penalties under Chapter 82, including one or more of the following sanctions if the commissioner determines from the facts that the sanction would be fair, reasonable, or equitable:

(1) suspension of the appointment for a specific period, not to exceed one year;

(2) issuance of an order directing the appointee to cease and desist from the specified activity or failure to act determined to be in violation of this subchapter or rules of the commissioner adopted under this subchapter; or

(3) if the commissioner finds that the appointee knowingly, wilfully, fraudulently, or with gross negligence failed to file the required inspection reports, or signed or caused to be prepared an inspection report that contains a false or fraudulent statement, issuance of an order directing the appointee to pay within a specified time, not to exceed 60 days, a fine not to exceed $5,000 for the violation.

(d) If it is found [after a hearing] that an appointee has failed to comply with an order issued under Subsection (b), the department shall, unless the order is stayed, revoke the appointment of the person.

(f) If an appointee is an engineer licensed by the Texas Board of Professional Engineers who is found by the department to have knowingly, wilfully, fraudulently, or with gross negligence failed to file the required inspection reports, or signed or caused to be prepared an inspection report that contains a false or fraudulent statement, the commissioner may take action against the appointee in the manner provided by Subsections (a) and (b) but may not assess a fine against the appointee. The commissioner shall notify the Texas Board of Professional Engineers of an order issued by the commissioner against an appointee who is an engineer licensed by that board, including an order suspending or revoking the appointment of the person.

SECTION 16. Section 2210.307(h), Insurance Code, is amended to read as follows:

(h) The advisory committee shall submit to the commissioner the committee's recommendation on each proposal. The commissioner shall notify the advisory committee of the acceptance or rejection of each recommendation not later than the 30th day after the date of receipt by the commissioner. Acceptance of a recommendation by the commissioner means that the commissioner will consider adoption of that recommendation at a rulemaking proceeding [hearing]. Before adopting a recommendation, the commissioner must determine that the proposal, if adopted, will not weaken the integrity or diminish the effectiveness of a procedure.

SECTION 17. Section 2210.351(d), Insurance Code, is amended to read as follows:

(d) If at any time the commissioner determines that a filing approved under Subsection (c) no longer meets the requirements of this chapter, the commissioner may, after [a hearing held on] at least 10 days' notice and a hearing, if a hearing is requested by any person within the 10-day notice period [20 days' notice to the association that specifies the matters to be considered at the hearing], issue an order withdrawing approval of the filing. The order must specify in what respects the commissioner determines that the filing no longer meets the requirements of this chapter. An order issued under this subsection may not take effect before the 30th day after the date of issuance of the order.

SECTION 18. Sections 2210.352(a) and (c), Insurance Code, are amended to read as follows:

(a) 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 does not apply to:

[(1)a filing made under this subsection; or

[(2)a department action with respect to the filing.]

(c) On request, the [The] commissioner shall schedule an open meeting not later than the 45th day after the date the department receives a filing at which interested persons may present written or oral comments relating to the filing.

SECTION 19. Section 2210.355(b), Insurance Code, is amended to read as follows:

(b) In adopting rates under this chapter, the following must be considered:

(1) the past and prospective loss experience within and outside this state of hazards for which insurance is made available through the plan of operation, if any;

(2) recognized catastrophe models;

(3) expenses of operation, including acquisition costs;

(4) [(3)] a reasonable margin for profit and contingencies; and

(5) [(4)] all other relevant factors, within and outside this state.

SECTION 20. Section 2210.356(b), Insurance Code, is amended to read as follows:

(b) The catastrophe element used to develop rates under this subchapter applicable to risks written by the association must be uniform throughout the seacoast territory. The catastrophe element of the rates must be developed using:

(1) 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]

(2) 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; and

(3) recognized catastrophe models and any other relevant factors as identified under Section 2210.355(b).

SECTION 21. Section 2210.359(b), Insurance Code, is amended to read as follows:

(b) The commissioner may[, after notice and hearing,] suspend this section on a finding that a catastrophe loss or series of occurrences resulting in losses in the catastrophe area justify a need to ensure:

(1) rate adequacy in the catastrophe area; and

(2) availability of insurance outside the catastrophe area.

SECTION 22. Section 2210.361(b), Insurance Code, is amended to read as follows:

(b) After notice and hearing, if a hearing is requested by any person not later than the 10th day after the date on which the notice is posted, the commissioner may accept, modify, or reject a recommendation made by the association under this section. Chapter 40 does not apply to an action taken under this section.

SECTION 23. Sections 2210.452(a), (c), and (d), Insurance Code, are amended to read as follows:

(a) 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 the catastrophe reserve trust fund. The trust fund may be used only to fund:

(1) the obligations of the trust fund under Section 2210.058 [2210.058(a)]; and

(2) the mitigation and preparedness plan established under Section 2210.454 to reduce the potential for payments by association members [that give rise to tax credits in the event of loss].

(c) At the end of each calendar year or policy year, the association shall pay the net gain from operations [equity] of the association [a member], including all premium and other revenue of the association in excess of incurred losses and operating expenses, to the trust fund or a reinsurance program approved by the commissioner. For the purposes of this subsection, "operating expenses" includes the cost of any reinsurance.

(d) The commissioner by rule shall establish the procedure relating to the disbursement of money from the trust fund [to policyholders in the event of an occurrence or series of occurrences within a catastrophe area that results in a disbursement under Section 2210.058(a)]. The rules may provide that money from the trust fund may be used to purchase reinsurance to protect the trust fund or to reimburse the association for the payment of policyholder claims. Any reinsurance purchases under this subsection must be included in the reinsurance approved under Section 2210.453.

SECTION 24. Section 2210.453, Insurance Code, is amended to read as follows:

Sec. 2210.453. REINSURANCE PROGRAM. (a) The association may [shall]:

(1) make payments into the trust fund; and [or]

(2) purchase [establish a] reinsurance as part of the association's annual operating expenses to the extent [program] approved by the department.

(b) With the approval of the department, the association may use [establish a] reinsurance [program] that operates in addition to or in concert with the trust fund and with assessments authorized by this chapter.

SECTION 25. Section 2210.504(a), Insurance Code, is amended to read as follows:

(a) Not later than the 60th day after the date of receipt of a filing under Section 2210.503, [and after notice and hearing,] the commissioner by order shall approve, disapprove, or modify the proposed adjustment to the maximum liability limits.

SECTION 26. Chapter 2210, Insurance Code, is amended by adding Subchapter M to read as follows: SUBCHAPTER M. PUBLIC SECURITIES PROGRAM

Sec. 2210.601. PURPOSE. The legislature finds that issuing public securities to provide a method to raise funds to provide windstorm, hail, and fire insurance through the association in certain designated areas of the state is to benefit the public and to further a public purpose.

Sec. 2210.602. DEFINITIONS. In this subchapter:

(1) "Board" means the board of directors of the Texas Public Finance Authority.

(2) "Insurer" means each property and casualty insurer authorized to engage in the business of property and casualty insurance in this state. The term specifically includes a county mutual insurance company, a Lloyd's plan, and a reciprocal or interinsurance exchange. The term does not include a county mutual insurance company described by Section 912.310.

(3) "Public security" means a debt instrument or other public security issued by the Texas Public Finance Authority.

(4) "Public security resolution" means the resolution or order authorizing public securities to be issued under this subchapter.

Sec. 2210.603. APPLICABILITY OF OTHER LAWS. (a) To the extent consistent with this subchapter, Chapter 1232, Government Code, applies to public securities issued under this subchapter. In the event of a conflict, this subchapter controls.

(b) The following laws also apply to public securities issued under this subchapter 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.

Sec. 2210.604. ISSUANCE OF PUBLIC SECURITIES AUTHORIZED. (a) At the request of the association and with the approval of the commissioner, the Texas Public Finance Authority shall issue public securities to:

(1) fund the association, including funding necessary to:

(A) establish and maintain reserves to pay claims;

(B) pay incurred claims;

(C) pay operating expenses; and

(D) purchase reinsurance;

(2) pay costs related to issuance of the public securities; and

(3) pay other costs related to the public securities as may be determined by the board.

(b) The Texas Public Finance Authority may issue, on behalf of the association, public securities in an amount sufficient to fund the insured losses and operating expenses of the association as determined by the association and approved by the commissioner after at least 10 days' notice and a hearing if a hearing is requested by any person within the 10-day notice period.

Sec. 2210.605. TERMS OF ISSUANCE. (a) Public securities issued under this subchapter may be issued at a public or private sale.

(b) Public securities must:

(1) be issued in the name of the association; and

(2) mature not more than 10 years after the date issued.

Sec. 2210.606. CONTENTS OF PUBLIC SECURITY RESOLUTION; ADMINISTRATION OF ACCOUNTS. (a) In a public security resolution, the board may:

(1) provide for the flow of funds and the establishment, maintenance, and investment of funds and special accounts with regard to the public securities, including an interest and sinking fund account, a reserve account, and other accounts; and

(2) 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.

(b) The association shall administer the accounts in accordance with this subchapter.

Sec. 2210.607. SOURCE OF PAYMENT. (a) Public securities issued under this subchapter are payable only from:

(1) the service fees established under Section 2210.609, as applicable; or

(2) other amounts that the association is authorized to levy, charge, and collect.

(b) The public securities are obligations solely of the association and do not create a pledge, gift, or loan of the faith, credit, or taxing authority of this state.

(c) Each public security must:

(1) include a statement that the state is not obligated to pay any amount on the security and that the faith, credit, or taxing authority of this state are not pledged, given, or lent to those payments; and

(2) state on the security's face that the security:

(A) is payable solely from the revenue pledged for that purpose; and

(B) is not and may not constitute a legal or moral obligation of the state.

Sec. 2210.608. PAYMENT OF INTEREST. (a) Except as provided by Subsection (b), all interest on a public security issued as described by Section 2210.058(d) or (e) shall be paid by the association from the existing premiums of the association.

(b) If the association is unable to pay the interest on a public security described by Subsection (a) with existing premiums, the interest on the public securities shall be paid from the service fees collected in accordance with Section 2210.609.

Sec. 2210.609. SERVICE FEES; PREMIUM SURCHARGE. (a) A fee to service public securities issued by the association prior or subsequent to a catastrophic event may be collected by each insurer, the association, and the FAIR Plan Association from policyholders who reside or have operations in, or whose insured property is located in, the catastrophe area.

(b) A fee to service public securities issued by the association may be collected by each insurer, the association, and the FAIR Plan Association from policyholders who reside or have operations in, or whose insured property is located in, this state.

(c) The association shall determine the amount of a service fee imposed under Subsection (a) or (b) at least annually.

(d) On approval by the commissioner after at least 10 days' notice and a hearing, if a hearing is requested by any person within the 10-day notice period, each insurer, the association, and the FAIR Plan Association shall charge the service fee to its policyholders. The service fee must be set in an amount sufficient to pay all debt service and all related expenses on the public securities. The service fee shall be collected in the form of a premium surcharge and shall be remitted to the association as required by the commissioner by rule.

(e) The premium surcharge shall apply to all insurance policies for all property and casualty lines other than workers' compensation, accident and health, and medical malpractice. The service fees collected in the form of a policy surcharge under this section are separate charges in addition to premiums collected and are not subject to premium taxes or commissions.

(f) For purposes of policy cancellation, failure by a policyholder to pay a premium surcharge imposed under this section is equivalent to failure to pay premium.

Sec. 2210.610. EXEMPTION FROM TAXATION. Public securities issued under this subchapter, 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.

Sec. 2210.611. AUTHORIZED INVESTMENTS. Public securities issued under this subchapter are authorized investments under Subchapter B, Chapter 424, and Subchapters C and D, Chapter 425.

Sec. 2210.612. STATE PLEDGE REGARDING PUBLIC SECURITY OWNER RIGHTS AND REMEDIES. (a) The state pledges to and agrees with the owners of public securities issued in accordance with this subchapter that the state will not limit or alter the rights vested in the association to fulfill the terms of agreements made with the owners or in any way impair the rights and remedies of those owners until the following obligations are fully discharged:

(1) the public securities;

(2) any bond premium;

(3) interest; and

(4) all costs and expenses related to an action or proceeding by or on behalf of the owners.

(b) The association may include the state's pledge and agreement under Subsection (a) in an agreement with the owners of the public securities.

Sec. 2210.613. PAYMENT ENFORCEABLE BY MANDAMUS. A writ of mandamus and any other legal or equitable remedy are available to a party in interest to require the association or another party to fulfill an agreement or perform a function or duty under:

(1) this subchapter;

(2) the Texas Constitution; or

(3) a public security resolution.

SECTION 27. Section 941.003, Insurance Code, is amended by adding Subsection (e) to read as follows:

(e) A Lloyd's plan is subject to Chapter 2210, as provided by that chapter.

SECTION 28. Section 942.003, Insurance Code, is amended by adding Subsection (f) to read as follows:

(f) An exchange is subject to Chapter 2210, as provided by that chapter.

SECTION 29. The following laws are repealed:

(1) Section 2210.207(f), Insurance Code;

(2) Sections 2210.353(d)-(f), Insurance Code; and

(3) Section 2210.506, Insurance Code.

SECTION 30. (a) The board of directors of the Texas Windstorm Insurance Association established under Section 2210.102, Insurance Code, as that section existed before amendment by this Act, is abolished on the 30th day after the effective date of this Act.

(b) The commissioner of insurance shall appoint the members of the board of directors of the Texas Windstorm Insurance Association under Section 2210.102, Insurance Code, as amended by this Act, for terms beginning on the 31st day after the effective date of 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 the 30th day after the effective date of this Act. 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 2210.102, Insurance Code, as amended by this Act.

SECTION 31. 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, 2007.