By: Smithee (Senate Sponsor - Fraser) H.B. No. 2960
         (In the Senate - Received from the House May 9, 2007;
  May 10, 2007, read first time and referred to Committee on Business
  and Commerce; May 18, 2007, reported adversely, with favorable
  Committee Substitute by the following vote:  Yeas 7, Nays 0;
  May 18, 2007, sent to printer.)
 
  COMMITTEE SUBSTITUTE FOR H.B. No. 2960 By:  Fraser
 
 
A BILL TO BE ENTITLED
 
AN ACT
 
  relating to operation of the Texas Windstorm Insurance Association
  and the Texas FAIR Plan Association, including funding of coverage
  for certain catastrophic events through the issuance of public
  securities.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 2210.002, Insurance Code, is amended to
  read as follows:
         Sec. 2210.002.  SHORT TITLE; SUNSET PROVISION. (a) This
  chapter may be cited as the Texas Windstorm Insurance Association
  Act.
         (b)  The association is subject to review under Chapter 325,
  Government Code (Texas Sunset Act), but is not abolished under that
  chapter. The association shall be reviewed during the period in
  which state agencies abolished in 2013 are reviewed. This
  subsection expires September 1, 2013.
         SECTION 1A.  Section 2210.001, Insurance Code, is amended to
  read as follows:
         Sec. 2210.001.  PURPOSE.  An adequate market for windstorm
  and[,] hail[, and fire] insurance in the seacoast territory is
  necessary to the economic welfare of this state, and without that
  insurance, the orderly growth and development of this state would
  be severely impeded. This chapter provides a method by which
  adequate windstorm and[,] hail[, and fire] insurance may be
  obtained in certain designated portions of the seacoast territory
  of this state.
         SECTION 2.  Section 2210.003(6), Insurance Code, is amended
  to read as follows:
               (6)  "Insurance" means Texas [fire and explosion
  insurance and Texas] windstorm and hail insurance.
         SECTION 3.  Sections 2210.004(a) and (g), Insurance Code,
  are amended to read as follows:
         (a)  For purposes of this chapter and subject to this
  section, "insurable property" means immovable property at a fixed
  location in a catastrophe area or corporeal movable property
  located in that immovable property, as designated in the plan of
  operation, that is determined by the association according to the
  criteria specified in the plan of operation to be in an insurable
  condition against windstorm and hail [or fire and explosion, as
  appropriate], as determined by normal underwriting standards.
         (g)  For purposes of this chapter, a residential structure is
  insurable property if:
               (1)  the residential structure is not:
                     (A)  a condominium, apartment, duplex, or other
  multifamily residence; or
                     (B)  a hotel or resort facility; and
               (2)  the residential structure is located within an
  area designated as a unit under the Coastal Barrier Resources Act
  (Pub. L. No. 97-348)[; and
               [(3)     a building permit or plat for the residential
  structure was filed with the municipality, the county, or the
  United States Army Corps of Engineers before January 1, 2004].
         SECTION 4.  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, 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, 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, that the applicable insurance
  coverage is no longer reasonably unavailable to a substantial
  number of owners of insurable property within the designated
  territory.
         (c) [(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, but not
  later than the 30th day after the date of the hearing, the
  commissioner shall:
               (1)  approve the request and revoke the designation; or
               (2)  reject the request.
         (d)  After at least 10 days' notice and a hearing, the
  commissioner may determine, unless such a determination creates an
  adverse impact to the exposure of the association, that windstorm
  and hail insurance is not reasonably available to a group that is
  located in a specified area of the state and that has similar risk
  characteristics. On such a determination by the commissioner, that
  group of risks shall be considered the same as a risk that is
  located in a catastrophe area for all purposes under this chapter.
         (e)  The commissioner shall revoke a determination made
  under Subsection (d) if the commissioner determines, after at least
  10 days' notice and a hearing, that the applicable insurance
  coverage is no longer reasonably unavailable to a group determined
  to be eligible under Subsection (d).
         (f)  If the association determines that windstorm and hail
  insurance is no longer reasonably unavailable to a group determined
  to be eligible under Subsection (d), the association may request in
  writing that the commissioner revoke the determination. After at
  least 10 days' notice and a hearing, but not later than the 30th day
  after the date of the hearing, the commissioner shall:
               (1)  approve the request and revoke the determination;
  or
               (2)  reject the request.
         (g)  The commissioner may adopt reasonable and necessary
  rules in the manner prescribed by Subchapter A, Chapter 36, to
  implement this section.
         SECTION 5.  Section 2210.008, Insurance Code, is amended to
  read as follows:
         Sec. 2210.008.  DEPARTMENT ORDERS; RULEMAKING AUTHORITY.
  (a)  The [After notice and 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)  The commissioner may adopt rules in the manner
  prescribed by Subchapter A, Chapter 36, as reasonable and necessary
  to implement this chapter. [Before the commissioner adopts an
  order, 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. Any person may appear at
  the hearing and testify for or against the adoption of the order.]
         SECTION 6.  Subchapter A, Chapter 2210, Insurance Code, is
  amended by adding Section 2210.009 to read as follows:
         Sec. 2210.009.  LIST OF PRIVATE INSURERS; INCENTIVE PLAN.
  (a) The department shall maintain a list of all insurers that
  engage in the business of property and casualty insurance in the
  voluntary market in the seacoast territory.
         (b)  The department shall develop incentive programs in the
  manner described by Section 2210.053(b) to encourage authorized
  insurers to write insurance on a voluntary basis and to minimize the
  use of the association as a means to obtain insurance.
         SECTION 7.  Section 2210.052, Insurance Code, is amended by
  amending Subsections (a) and (d) and adding Subsection (e) to read
  as follows:
         (a)  Each member of the association shall participate in
  insured losses and operating expenses of the association, in excess
  of premium and other revenue [the 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 areas [an area] designated
  by the commissioner. The member's participation in the insured
  losses and operating expenses of the association in excess of
  premium and other revenue [writings] of the association shall be
  reduced in accordance with the plan of operation.
         (e)  Notwithstanding Subsections (a)-(d), an insurer that
  becomes a member of the association and that has not previously been
  a member of the association is not subject to participation in any
  insured losses and operating expenses of the association in excess
  of premium and other revenue of the association until the second
  anniversary of the date on which the insurer first becomes a member
  of the association. The commissioner may adopt procedures in the
  plan of operation for reduced assessments for such an insurer for an
  additional period, not to exceed three years, beyond the initial
  exemption under this subsection.
         SECTION 8.  Section 2210.053, Insurance Code, is amended by
  adding Subsection (c) to read as follows:
         (c)  As directed by the commissioner, after notice and
  hearing, the association shall assume reinsurance from a county
  mutual insurance company issuing industrial fire insurance
  policies as described by Section 912.310.
         SECTION 9.  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 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 and operating
  expenses shall be paid as provided by this section.
         (b)  For each occurrence, [follows:
               [(1)     $100 million shall be assessed against the
  members of the association as provided by Subsection (b);
               [(2)]  losses [in excess of $100 million] shall be paid
  as provided by this section from the catastrophe reserve trust fund
  established under Subchapter J. For each occurrence, 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 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. If the trust fund is reduced by more than
  50 percent in any calendar year, the association may, with the
  approval of the commissioner, require each member of the
  association and the Texas FAIR Plan Association to collect a
  premium surcharge for one year from their respective policyholders
  who reside or have operations in, or whose insured property is
  located in, the catastrophe area.  The premium surcharge may not
  exceed two percent of premium and applies to all policies of
  insurance for all property and casualty lines, other than workers'
  compensation insurance, accident and health insurance, and medical
  malpractice insurance.  The premium surcharge collected under this
  subsection shall be deposited in the catastrophe reserve trust
  fund.
         (c)  Losses [and any reinsurance program established by the
  association;
               [(3)  for losses] in excess of those paid under
  Subsection (b) [Subdivisions (1) and (2), an additional $200
  million] shall be paid as provided by this subsection. For each
  occurrence, an amount equal to a maximum of 2.5 percent of all the
  direct premiums written by all the members of the association and
  the Texas FAIR Plan Association, as reported in the annual
  statement filed with the department for the calendar year
  immediately preceding the year in which the assessment is made for
  fire insurance and allied lines insurance, homeowners insurance,
  farm and ranch insurance, and commercial multiperil insurance,
  shall be computed and assessed against the members of the
  association and the Texas FAIR Plan Association, as provided by
  Subsection (h). The association may not assess members of the
  association and the Texas FAIR Plan Association under this
  subsection more than twice in any calendar year.
         (d)  Any [(b); and
               [(4)]  losses in excess of those paid under
  Subsections (b) and (c) [Subdivisions (1), (2), and (3)] shall be
  paid with proceeds from Class 1 public securities issued by the
  association in accordance with Subchapter M before the date of any
  occurrence that results in insured losses under Subsection (a), as
  provided by Subsection (i).
         (e)  For losses in excess of those paid under Subsections
  (a), (b), and (c), an amount equal to a maximum of four percent of
  all the direct premiums written by all the members of the
  association and the Texas FAIR Plan Association, as reported in the
  annual statement filed with the department for the calendar year
  immediately preceding the year in which the assessment is made for
  fire insurance and allied lines insurance, homeowners insurance,
  farm and ranch insurance, and commercial multiperil insurance,
  shall be computed and assessed against the members of the
  association and the Texas FAIR Plan Association, as provided by
  Subsection (h). The association may not assess members of the
  association and the Texas FAIR Plan Association under this
  subsection more than twice in any calendar year [assessed against
  members of the association, as provided by Subsection (b)].
         (f)  Any losses in excess of those paid under Subsections
  (b)-(e) shall be paid from proceeds from Class 2 public securities
  issued by the association in accordance with Subchapter M on or
  after the date of any occurrence that results in insured losses
  under Subsection (a).
         (g)  Any losses in excess of those paid under Subsections
  (b)-(f) shall be assessed against members of the association and
  the Texas FAIR Plan Association, as provided by Subsection (h).
         (h) [(b)]  The proportion of the losses allocable to each
  insurer and the Texas FAIR Plan Association under Subsections (c),
  (e), and (g) [(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, and as to the Texas
  FAIR Plan Association, as provided by the plan of operation.
         (i)  Public securities described by Subsection (d) may be
  issued in principal amounts not to exceed $1.2 billion. Any public
  securities proceeds received under Subsection (d) must be used
  before the proceeds of any public securities that the association
  authorizes to be issued under Subsection (f) on or after any
  catastrophic event, and may not be used to fund losses of any
  catastrophic event occurring before the date on which public
  securities described by Subsection (d) are authorized to be issued.
         (j)  In addition to the funding described by Subsections
  (b)-(g), the association may also borrow from, or enter into other
  financing arrangements with, any market sources at prevailing
  interest rates.
         (k)  The commissioner may adopt rules in the manner provided
  by Subchapter A, Chapter 36, as necessary to implement this
  section.
         [(c)     An insurer 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 as an admitted asset of the insurer for all
  purposes, including exhibition in an annual statement under Section
  862.001.]
         SECTION 10.  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 11.  The heading to Subchapter C, Chapter 2210,
  Insurance Code, is amended to read as follows:
  SUBCHAPTER C.  ASSOCIATION BOARD OF DIRECTORS; GENERAL POWERS AND
  DUTIES OF BOARD OF DIRECTORS
         SECTION 12.  Section 2210.102, Insurance Code, is amended to
  read as follows:
         Sec. 2210.102.  COMPOSITION.  (a)  The board of directors is
  composed of [the following] nine members appointed by the
  commissioner in accordance with this section.
         (b)  Four members must be [:
               [(1)  five] representatives of different insurers who
  are members of the association.
         (c)  Three members must be [, elected by the members as
  provided by the plan of operation;
               [(2)  two] public representatives:
               (1)  at least one of whom [who are nominated by the
  office of public insurance counsel and who], as of the date of the
  appointment, resides[:
                     [(A)  reside] in or owns property in a first tier
  coastal county and at least one of whom, as of the date of the
  appointment, does not reside in or own property in the seacoast
  territory [a catastrophe area]; and
               (2)  who [(B)] are policyholders of the association.
         (d)  Two members must be [; and
               [(3)  two] general property and casualty agents who are
  licensed under this code and are not captive agents.  One of the
  agents, as of the date of the appointment, must maintain the agent's
  principal office in a first tier coastal county.  The second agent,
  as of the date of the appointment, may not maintain the agent's
  principal office in the seacoast territory.
         (e)  All members must have [:
                     [(A)  who have] demonstrated experience in
  insurance, general business, or actuarial principles sufficient to
  make the success of the association probable[; and
                     [(B)     whose principal offices, as of the date of
  the appointment, are located in a catastrophe area].
         [(b)     The persons appointed under Subsections (a)(2) and (3)
  must be from different counties.]
         SECTION 13.  Section 2210.103, Insurance Code, is amended by
  adding Subsection (c) to read as follows:
         (c)  The commissioner shall appoint a replacement in the
  manner provided by Section 2210.102 for a member who leaves or is
  removed from the board of directors.
         SECTION 14.  Section 2210.104, Insurance Code, is amended to
  read as follows:
         Sec. 2210.104.  OFFICERS. The board of directors shall
  elect from the board's membership an executive committee consisting
  of a presiding officer, assistant presiding officer, and
  secretary-treasurer. [At least one of the officers must be a member
  appointed under Section 2210.102(a)(2) or (3).]
         SECTION 15.  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 16.  Subchapter C, Chapter 2210, Insurance Code, is
  amended by adding Section 2210.107 to read as follows:
         Sec. 2210.107.  PRIMARY BOARD OBJECTIVES.  The primary
  objectives of the board of directors are to ensure that the
  association:
               (1)  operates in accordance with this chapter and
  commissioner rules;
               (2)  complies with sound insurance principles; and
               (3)  meets all standards imposed under this chapter.
         SECTION 17.  Section 2210.151, Insurance Code, is amended to
  read as follows:
         Sec. 2210.151.  ADOPTION OF PLAN OF OPERATION. With the
  advice of the board of directors, the commissioner by rule shall
  adopt the plan of operation to provide[:
               [(1)]  Texas windstorm and hail insurance in a
  catastrophe area[; and
               [(2)     Texas fire and explosion insurance in an
  inadequate fire insurance area].
         SECTION 18.  Section 2210.152(a), Insurance Code, is amended
  to read as follows:
         (a)  The plan of operation must:
               (1)  provide for the efficient, economical, fair, and
  nondiscriminatory administration of the association; and
               (2)  include:
                     (A)  a plan for the equitable assessment of the
  members of the association to defray losses and expenses;
                     (B)  underwriting standards;
                     (C)  procedures for accepting and ceding
  reinsurance;
                     (D)  procedures for determining the amount of
  insurance to be provided to specific risks;
                     (E)  time limits and procedures for processing
  applications for insurance; [and]
                     (F)  a plan for the assessment of the Texas FAIR
  Plan Association; and
                     (G)  other provisions as considered necessary by
  the department to implement the purposes of this chapter.
         SECTION 19.  Section 2210.202(a), Insurance Code, is amended
  to read as follows:
         (a)  A person who has an insurable interest in insurable
  property may apply to the association for insurance coverage
  provided under the plan of operation and an inspection of the
  property, subject to any rules[, including any inspection fee,]
  established by the board of directors and approved by the
  commissioner.  The association shall make insurance available to
  each applicant in the catastrophe area whose property is insurable
  property but who, after diligent efforts, is unable to obtain
  property insurance through the voluntary market, as evidenced by
  two declinations from insurers authorized to engage in the business
  of, and writing, property insurance in this state.  For purposes of
  this section, "declination" has the meaning assigned by the plan of
  operation and may include a refusal to offer coverage and the
  inability to obtain substantially equivalent insurance coverage
  and rates.
         SECTION 20.  Section 2210.203, Insurance Code, is amended by
  adding Subsection (a-1) to read as follows:
         (a-1)  Notwithstanding Subsection (a), if all or any part of
  the property for which an application for new or renewal insurance
  coverage is made is located in Zone V or another similar zone with
  an additional hazard associated with storm waves, as defined by the
  National Flood Insurance Program, and if flood insurance under that
  federal program is available, the association may not issue a new or
  renewal insurance policy unless evidence that the property is
  covered by a flood insurance policy is submitted to the
  association.  If that flood insurance is unavailable in any portion
  of the seacoast territory, an association policy insuring a
  residential structure described by Section 2210.004(g) is subject
  to a premium surcharge for the insurance coverage obtained through
  the association in an amount equal to not less than 10 percent of
  the premium, as set by the commissioner after notice and a hearing.  
  A premium surcharge collected under this subsection shall be
  deposited in the catastrophe reserve trust fund under Subchapter J.  
  A premium surcharge under this subsection is a separate charge in
  addition to the premiums collected and is not subject to premium tax
  or commissions.  Failure to pay the surcharge by a policyholder
  constitutes failure to pay premium for purposes of policy
  cancellation.
         SECTION 21.  Subchapter E, Chapter 2210, Insurance Code, is
  amended by adding Section 2210.210 to read as follows:
         Sec. 2210.210.  NOTICE TO APPLICANTS FOR INSURANCE AND
  POLICYHOLDERS; CONSUMER INFORMATION. (a) Each application for
  insurance and each policy issued by the association must include a
  notice as provided by this section. The commissioner by rule may
  prescribe specific requirements for the notice. The notice must be
  substantially as follows:
  IMPORTANT NOTICE TO TEXAS WINDSTORM INSURANCE
  ASSOCIATION POLICYHOLDERS
         Insurance policies issued by the Texas Windstorm Insurance
  Association are not guaranteed by the state or federal government.
  In the event of a major catastrophe, the association may not have
  sufficient funding resources to pay all losses to all policyholders
  suffering damage. In such an event, you may be paid less than the
  full amount of damages that you suffer. You may obtain additional
  information as to the association's potential exposure and its
  available funding resources at www.tdi.state.tx.us.
         (b)  The department shall establish a link on the
  department's Internet website through which applicants for
  insurance coverage through the association and association
  policyholders may obtain information in a format easily understood
  about the association's exposure and available resources.
         SECTION 22.  Section 2210.251, Insurance Code, is amended to
  read as follows:
         Sec. 2210.251.  INSPECTION REQUIREMENTS.  (a)  Except as
  provided by this section, to be considered insurable property
  eligible for windstorm and hail insurance coverage from the
  association, a structure that is constructed or repaired or to
  which additions are made on or after January 1, 1988, must be
  inspected [or approved] by the association [department] for
  compliance with the plan of operation.
         (b)  After January 1, 2004, for geographic areas specified by
  the commissioner, the board of directors [commissioner by rule]
  shall recognize for the purposes of this chapter [adopt] the 2003
  International Residential Code for one- and two-family dwellings
  published by the International Code Council. For those geographic
  areas, the board of directors [commissioner by rule] may recognize
  [adopt] a subsequent edition of that code and [may adopt] any
  supplements published by the International Code Council and
  amendments to that code.
         (c)  After January 1, 2004, a person must submit a notice of a
  windstorm inspection to the association [unit responsible for
  certification of windstorm inspections at the department] before
  beginning to construct, alter, remodel, enlarge, or repair a
  structure.
         (d)  A structure constructed or repaired or to which
  additions were made before January 1, 1988, that is located in an
  area that was governed at the time of the construction, repair, or
  addition by a building code recognized by the association is
  insurable property eligible for windstorm and hail insurance
  coverage from the association without compliance with the
  inspection [or approval] requirements of this section or the plan
  of operation.
         (e)  A structure constructed or repaired or to which
  additions were made before January 1, 1988, that is located in an
  area not governed by a building code recognized by the association
  is insurable property eligible for windstorm and hail insurance
  coverage from the association without compliance with the
  inspection [or approval] requirements of this section or the plan
  of operation if the structure was previously insured by an insurer
  authorized to engage in the business of insurance in this state and
  the structure is in essentially the same condition as when
  previously insured, except for normal wear and tear, and is without
  any structural change other than a change made according to code.  
  For purposes of this subsection, evidence of previous insurance
  coverage includes:
               (1)  a copy of a previous insurance policy;
               (2)  copies of canceled checks or agent's records that
  show payments for previous policies; and
               (3)  a copy of the title to the structure or mortgage
  company records that show previous policies.
         (f)  The association [department] shall issue a certificate
  of compliance for each structure that qualifies for coverage. The
  certificate is evidence of insurability of the structure by the
  association.
         (g)  [The department may enter into agreements and contracts
  as necessary to implement this section.
         [(h)]  The association [department] may charge a reasonable
  fee to cover the cost of making building requirements and
  inspection standards available to the public.
         (h)  The association may charge a reasonable fee for each
  inspection in an amount set by commissioner rule. The association
  may use fees collected under this section for operating expenses.
         (i)  In the event of an occurrence or series of occurrences
  within a defined catastrophe area that results in widespread
  destruction of property, the association may:
               (1)  fund inspections, including the funding of
  expenses for:
                     (A)  independent contractors hired by the
  association to serve as temporary qualified inspectors; and
                     (B)  other persons designated by the association
  to assist with inspections or related responsibilities as necessary
  to facilitate recovery, rebuilding, and repair in the affected
  catastrophe area; or
               (2)  hire independent contractors and other persons as
  described by Subdivision (1) as necessary to facilitate recovery,
  rebuilding, and repair in the affected catastrophe area.
         (j)  Without limitation of the department's authority to
  otherwise enforce this chapter, the department shall monitor the
  association's compliance with this subchapter and may take any
  disciplinary action available under this code to enforce this
  subchapter, including an action authorized under Chapters 82, 83,
  and 84.
         (k)  The commissioner may adopt rules in the manner
  prescribed by Subchapter A, Chapter 36, as necessary to implement
  this section.
         SECTION 23.  Section 2210.252, Insurance Code, is amended to
  read as follows:
         Sec. 2210.252.  INTERNATIONAL RESIDENTIAL CODE BUILDING
  SPECIFICATIONS. (a)  After January 1, 2004, for geographic areas
  specified by the commissioner, the association [commissioner by
  rule] may supplement the plan of operation building specifications
  with the structural provisions of the International Residential
  Code for one- and two-family dwellings, as published by the
  International Code Council or an analogous entity recognized by the
  board of directors [department].
         (b)  For a geographic area specified under Subsection (a),
  the board of directors [commissioner by rule] may recognize [adopt]
  a subsequent edition of the International Residential Code for
  one- and two-family dwellings and [may adopt] a supplement
  published by the International Code Council or an amendment to that
  code.
         SECTION 24.  Sections 2210.254(a) and (b), Insurance Code,
  are amended to read as follows:
         (a)  For purposes of this chapter, a "qualified inspector"
  includes:
               (1)  a person determined by the board of directors
  [department] to be qualified because of training or experience to
  perform building inspections;
               (2)  a licensed professional engineer who meets the
  requirements specified by the board of directors [commissioner
  rule] for appointment to conduct windstorm inspections; and
               (3)  an inspector who:
                     (A)  is certified by the International Code
  Council, the Building Officials and Code Administrators
  International, Inc., the International Conference of Building
  Officials, or the Southern Building Code Congress International,
  Inc.;
                     (B)  has certifications as a buildings inspector
  and coastal construction inspector; and
                     (C)  complies with other requirements specified
  by the board of directors [commissioner rule].
         (b)  A windstorm inspection may be performed only by a
  qualified inspector who is employed by or under contract with the
  association.
         SECTION 25.  Section 2210.255, Insurance Code, is amended to
  read as follows:
         Sec. 2210.255.  APPOINTMENT OF LICENSED ENGINEER AS
  INSPECTOR. (a)  On request of an engineer licensed by the Texas
  Board of Professional Engineers, the association may [commissioner
  shall] appoint the engineer as an inspector under this subchapter
  on receipt of information satisfactory to the board of directors
  [not later than the 10th day after the date the engineer delivers to
  the commissioner information demonstrating] that the engineer is
  qualified to perform windstorm inspections under this subchapter.
         (b)  The board of directors shall consult with the
  commissioner regarding [shall adopt rules establishing] the
  information to be considered in appointing engineers under this
  section.
         SECTION 26.  Subchapter F, Chapter 2210, Insurance Code, is
  amended by adding Sections 2210.258 through 2210.261 to read as
  follows:
         Sec. 2210.258.  MANDATORY COMPLIANCE WITH BUILDING CODES;
  ELIGIBILITY.  (a)  Notwithstanding any other provision of this
  chapter, to be eligible for insurance through the association, all
  construction, alteration, remodeling, enlargement, and repair of
  any structure located in the catastrophe area that is begun on or
  after January 1, 2008, must be performed in compliance with the
  applicable building code standards, as set forth in the plan of
  operation.
         (b)  The association may not insure a structure described by
  Subsection (a) until:
               (1)  the structure has been inspected for compliance
  with the plan of operation in accordance with Section 2210.251(a);
  and
               (2)  a certificate of compliance has been issued for
  the structure in accordance with Section 2210.251(f).
         Sec. 2210.259.  EXCEPTION; SURCHARGE FOR CERTAIN
  NONCOMPLIANT STRUCTURES.  (a)  The association may not insure a
  structure that has not been inspected for compliance with the plan
  of operation in accordance with Section 2210.251(a) and for which a
  certificate of compliance has not been issued on the structure in
  accordance with Section 2210.251(f), unless the structure:
               (1)  is a residential structure or is the property of a
  school district or public, or not-for-profit, postsecondary
  educational institution, including a junior college;
               (2)  was constructed, altered, remodeled, enlarged, or
  repaired before January 1, 2008, and has not been further altered,
  remodeled, enlarged, or repaired on or after January 1, 2008; and
               (3)  was:
                     (A)  insured in the private market within the
  12-month period immediately preceding the date of the application;
  or
                     (B)  property covered by a self-insured school
  district or postsecondary institution.
         (b)  A structure eligible for insurance under Subsection (a)
  is subject to a premium surcharge for insurance coverage obtained
  through the association.  The commissioner shall determine the
  surcharge, after notice and a hearing, in an amount not less than an
  amount equal to 20 percent of the premium.
         (c)  A premium surcharge collected under this section shall
  be deposited in the catastrophe reserve trust fund under Subchapter
  J.  A premium surcharge under this section is a separate charge in
  addition to the premiums collected and is not subject to premium tax
  or commissions. Failure to pay the surcharge by a policyholder
  constitutes failure to pay premium for purposes of policy
  cancellation.
         Sec. 2210.260.  STRUCTURES NOT SUBJECT TO PREMIUM SURCHARGE.  
  Notwithstanding Section 2210.259, the association may insure
  without a premium surcharge a structure that:
               (1)  was constructed or repaired or to which additions
  were made before January 1, 1988, and not thereafter, and is
  eligible for association coverage under Section 2210.251(d) or (e);
  or
               (2)  is the subject of a certificate of compliance
  issued by the department and that has not been altered, remodeled,
  enlarged, or repaired after the date of issuance of the last
  department certificate.
         Sec. 2210.261.  RULES.  The commissioner may adopt rules to
  implement Sections 2210.258, 2210.259, and 2210.260.
         SECTION 27.  Section 2210.351(c), Insurance Code, is amended
  to read as follows:
         (c)  Except as provided by Section 2210.352(a-1), as [As]
  soon as reasonably possible after the filing has been made, the
  commissioner in writing shall approve, modify, or disapprove the
  filing. A filing is considered approved unless modified or
  disapproved on or before the 30th day after the date of the filing.
         SECTION 28.  Section 2210.352, Insurance Code, is amended by
  amending Subsection (a) and adding Subsection (a-1) 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.
         (a-1)  The association may use a rate filed by the
  association without prior commissioner approval if:
               (1)  the filing is made not later than the 60th day
  before the date of any use or delivery for use of the rate;
               (2)  the filed rate does not exceed 105 percent of the
  rate used by the association during the preceding 12-month period;
               (3)  the filed rate does not reflect a rate change for
  an individual rating class that is five percent higher than any rate
  used by the association for that rating class during the preceding
  12-month period; and
               (4)  the commissioner has not provided written notice
  to the association that the filing will be disapproved or modified
  under the procedure established under Subsections (b)-(g).
         SECTION 29.  Section 2210.354(a), Insurance Code, is amended
  to read as follows:
         (a)  In conjunction with the review of a filing under Section
  2210.352 or 2210.353:
               (1)  the commissioner may request the association to
  provide additional supporting information relating to the filing;
  and
               (2)  in the case of a filing in which the filed rate
  exceeds 105 percent of the rate used by the association during the
  preceding 12-month period, any interested person may file a written
  request with the commissioner for additional supporting
  information relating to the filing.
         SECTION 30.  Section 2210.355, Insurance Code, is amended by
  adding Subsections (h) and (i) to read as follows:
         (h)  The association may establish rating territories and
  may vary rates among the territories.  The association may use
  rating territories that subdivide a county only if the rate for any
  subdivision in the county is not greater than 15 percent higher than
  the rate used in any other subdivision of that county.
         (i)  Catastrophe models, including hurricane models, may not
  be used to develop rates under this chapter.
         SECTION 31.  Sections 2210.452(a) and (c), Insurance Code,
  are amended to read as follows:
         (a)  The commissioner shall adopt rules under which the
  association makes [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 and the Texas FAIR Plan Association 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.
         SECTION 32.  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 commissioner [department].
         (b)  As provided by this subsection, the [With the approval
  of the department, the] association may purchase [establish a]
  reinsurance [program] that operates in addition to or in concert
  with the trust fund and with assessments authorized by this
  chapter.  The association may purchase reinsurance in lieu of using
  public securities authorized under Section 2210.058 if, after a
  cost-benefit analysis or other appropriate examination, the board
  of directors determines that the use of reinsurance would result in
  lower costs to the association or is otherwise economically
  beneficial to the operations of the association.
         SECTION 33.  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
  authorizing the issuance of public securities to provide a method
  to raise funds to provide windstorm and hail 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.
         Sec. 2210.602.  DEFINITIONS. In this subchapter:
               (1)  "Board" means the board of directors of the Texas
  Public Finance Authority.
               (2)  "Class 1 public securities" means public
  securities authorized to be issued before the occurrence of a
  catastrophic event by Section 2210.058(d).
               (3)  "Class 2 public securities" means public
  securities authorized to be issued on or after the occurrence of a
  catastrophic event by Section 2210.058(f).
               (4)  "Credit agreement" means:
                     (A)  a loan agreement;
                     (B)  a revolving credit agreement, an agreement
  establishing a line of credit, or a letter of credit;
                     (C)  an interest rate swap agreement, an interest
  rate lock agreement, a currency swap agreement, or a forward
  payment conversion agreement;
                     (D)  an agreement to provide payments based on
  levels of or changes in interest rates or currency exchange rates;
                     (E)  an agreement to exchange cash flows or a
  series of payments;
                     (F)  an option, put, or call to hedge payment,
  currency, interest rate, or other exposure; or
                     (G)  another agreement that enhances the
  marketability, security, or creditworthiness of a public security
  issued under this subchapter.
               (5)  "Insurer" means each property and casualty insurer
  authorized to engage in the business of property and casualty
  insurance in this state and an affiliate of such an insurer, as
  described by Section 823.003, including an affiliate that is not
  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.
               (6)  "Public security" means a debt instrument or other
  public security issued by the Texas Public Finance Authority.
               (7)  "Public security administrative expenses" means
  expenses incurred to administer public securities issued under this
  subchapter, including fees for paying agents, trustees, and
  attorneys, and for other professional services necessary to ensure
  compliance with applicable state or federal law.
               (8)  "Public security obligations" means the principal
  of a public security and any premium and interest on a public
  security issued under this subchapter, together with any amount
  owed under a related credit agreement.
               (9)  "Public security obligation revenue fund" means
  the dedicated trust fund established by the association outside the
  state treasury under this subchapter.
               (10)  "Public security resolution" means the
  resolution or order authorizing public securities to be issued
  under this subchapter.
         Sec. 2210.603.  APPLICABILITY OF OTHER LAWS. The board
  shall issue the public securities as described by Section 2210.604
  in accordance with and subject to the requirements of Chapter 1232,
  Government Code, and other provisions of Title 9, Government Code,
  that apply to issuance of a public security by a state agency.  In
  the event of a conflict, this subchapter controls.
         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 Class
  1 or Class 2 public securities.
         (b)  The association shall specify in the association's
  request to the board the maximum principal amount of the public
  securities and the maximum term of the public securities, not to
  exceed 30 years.
         (c)  The principal amount determined by the association
  under Subsection (b) may be increased to include an amount
  sufficient to:
               (1)  pay the costs related to issuance of the public
  securities;
               (2)  provide a public security reserve fund; and
               (3)  capitalize interest for the period determined
  necessary by the association, not to exceed two years.
         Sec. 2210.605.  TERMS OF ISSUANCE. (a)  The board shall
  determine the method of sale, type and form of public security,
  maximum interest rates, and other terms of the public securities
  that, in the board's judgment, best achieve the goals of the
  association and effect the borrowing at the lowest practicable
  cost. The board may enter into a credit agreement in connection
  with the public securities.
         (b)  Public securities must be issued in the name of the
  association.
         Sec. 2210.606.  ADDITIONAL COVENANTS. 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 provide for the flow of funds and the establishment,
  maintenance, and investment of funds and accounts with respect to
  the public securities, and the administration of those funds and
  accounts, as provided in the proceedings authorizing the public
  securities.
         Sec. 2210.607.  PUBLIC SECURITY PROCEEDS. The proceeds of
  public securities issued by the board under this subchapter may be
  deposited with a trustee selected by the association in
  consultation with the commissioner or held by the comptroller in a
  dedicated trust fund outside the state treasury in the custody of
  the comptroller.
         Sec. 2210.608.  USE OF PUBLIC SECURITY PROCEEDS. (a) Public
  security proceeds, including investment income, shall be held in
  trust for the exclusive use and benefit of the association. The
  association may use the proceeds to:
               (1)  pay incurred claims and operating expenses of the
  association;
               (2)  purchase reinsurance for the association;
               (3)  pay the costs of issuing the public securities,
  and public security administrative expenses, if any;
               (4)  provide a public security reserve; and
               (5)  pay capitalized interest and principal on the
  public securities for the period determined necessary by the
  association, not to exceed two years.
         (b)  Any excess public security proceeds remaining after the
  purposes for which the public securities were issued are satisfied
  may be used to purchase or redeem outstanding public securities. If
  there are no outstanding public security obligations or public
  security administrative expenses, the excess proceeds shall be
  transferred to the catastrophe reserve trust fund.
         Sec. 2210.609.  REPAYMENT OF ASSOCIATION'S PUBLIC SECURITY
  OBLIGATIONS. (a) The association shall pay all public security
  obligations from available funds collected by the association from
  and deposited into the public security obligation revenue fund. If
  the association determines that it is unable to pay the public
  security obligations and public security administrative expenses,
  if any, with available funds, the association shall pay those
  obligations and expenses in accordance with Sections 2210.612 and
  2210.613.
         (b)  The board shall notify the association of the amount of
  the public security obligations and the estimated amount of public
  security administrative expenses, if any, each year in a period
  sufficient, as determined by the association, to permit the
  association to determine the availability of funds and assess a
  premium surcharge if necessary.
         (c)  The association shall deposit all revenue collected
  under Sections 2210.612 and 2210.613 in the public security
  obligation revenue fund. Money deposited in the fund may be
  invested as permitted by general law. Money in the fund required to
  be used to pay public security obligations and public security
  administrative expenses, if any, shall be transferred to the
  appropriate funds in the manner and at the time specified in the
  proceedings authorizing the public securities to ensure timely
  payment of obligations and expenses.
         (d)  The association shall provide for the payment of the
  public security obligations and the public security administrative
  expenses by irrevocably pledging revenues received from premiums,
  premium surcharges, and amounts on deposit in the public security
  obligation revenue fund, together with any public security reserve
  fund, as provided in the proceedings authorizing the public
  securities and related credit agreements.
         (e)  An amount owed by the board under a credit agreement
  shall be payable from and secured by a pledge of revenues received
  by the association or amounts from the obligation trust fund to the
  extent provided in the proceedings authorizing the credit
  agreement.
         Sec. 2210.610.  PUBLIC SECURITY PAYMENTS. (a) Revenues
  received from the premium surcharges under Section 2210.612 or
  2210.613 may be applied only as provided by this subchapter.
         (b)  The association may pay public security obligations
  with other legally available funds.
         (c)  Public security obligations are payable only from
  sources provided for payment in this subchapter.
         Sec. 2210.611.  EXCESS REVENUE COLLECTIONS AND INVESTMENT
  EARNINGS. Revenue collected in any year from a premium surcharge
  under Section 2210.612 or 2210.613 that exceeds the amount of the
  public security obligations and public security administrative
  expenses payable in that year and interest earned on the public
  security obligation fund may, in the discretion of the association,
  be:
               (1)  used to pay public security obligations payable in
  the subsequent year, offsetting the amount of the premium surcharge
  that would otherwise be required to be levied for the year under
  this subchapter;
               (2)  used to redeem or purchase outstanding public
  securities; or
               (3)  deposited in the catastrophe reserve trust fund.
         Sec. 2210.612.  CLASS 1 PREMIUM SURCHARGE. (a)  Each
  insurer, the association, and the Texas FAIR Plan Association may
  collect from their policyholders a surcharge in addition to any
  premiums to pay public security obligations and public security
  administrative expenses, if any, on Class 1 public securities.
         (b)  The association shall determine the premium surcharge
  at least annually.
         (c)  On approval by the commissioner, each insurer, the
  association, and the Texas FAIR Plan Association shall assess a
  premium surcharge to its policyholders as provided by this section.
  The premium surcharge must be set in an amount sufficient to pay all
  debt service not already covered by available funds and all related
  expenses on the public securities.
         (d)  The association shall collect the premium surcharge
  from its policyholders. Each insurer and the Texas FAIR Plan
  Association shall collect the premium surcharge from their
  policyholders who have a property or casualty policy that provides
  coverage for premises, locations, operations, or property located
  in the catastrophe area and shall remit the premium surcharge to the
  association as required by commissioner rule.
         (e)  A premium surcharge under this section shall apply to
  all policies that provide coverage on any premises, locations,
  operations, or property located in the catastrophe area for all
  property and casualty lines of insurance, other than workers'
  compensation insurance, accident and health insurance, and medical
  malpractice insurance. The premium surcharge does not apply to
  premiums charged for any premises, locations, operations, or
  property located outside the catastrophe area, except for premiums
  charged by the association for property insured by the association.
         (f)  A premium surcharge under this section is a separate
  charge in addition to the premiums collected and is not subject to
  premium tax or commissions. Failure to pay the surcharge by a
  policyholder constitutes failure to pay premium for purposes of
  policy cancellation.
         Sec. 2210.613.  CLASS 2 PREMIUM SURCHARGE. (a)  Each
  insurer, the association, and the Texas FAIR Plan Association shall
  collect from their policyholders a premium surcharge to pay public
  security obligations and public security administrative expenses,
  if any, on Class 2 public securities.
         (b)  The association shall determine the premium surcharge
  at least annually.
         (c)  On approval by the commissioner, each insurer, the
  association, and the Texas FAIR Plan Association shall assess a
  premium surcharge to its policyholders as provided by this section.
  The premium surcharge must be set in an amount sufficient to pay all
  debt service and all related expenses on the public securities.  The
  premium surcharge assessed under this section may not exceed six
  percent of premium and cumulatively may not exceed 10 percent of
  premium over a 12-month period beginning on the date the surcharge
  is first assessed.
         (d)  Each insurer, the association, and the Texas FAIR Plan
  Association shall collect the premium surcharge under this section
  from their policyholders who have a property or casualty policy
  that provides coverage for premises, locations, operations, or
  property located in this state, and shall remit the premium
  surcharge to the association as required by commissioner rule.
         (e)  A premium surcharge under this section shall apply to
  all policies that provide coverage on any premises, locations,
  operations, or property located in this state for all property and
  casualty lines of insurance, other than workers' compensation
  insurance, accident and health insurance, and medical malpractice
  insurance. The premium surcharge does not apply to premiums
  charged for any premises, locations, operations, or property
  located outside this state.
         (f)  A premium surcharge under this section is a separate
  charge in addition to the premiums collected and is not subject to
  premium tax or commissions. Failure to pay the surcharge by a
  policyholder constitutes failure to pay premium for purposes of
  policy cancellation.
         Sec. 2210.614.  SOURCE OF PAYMENT; STATE DEBT NOT CREATED.
  (a) A public security or credit agreement is payable solely from
  revenue as provided by this subchapter.
         (b)  A public security issued under this subchapter, and any
  related credit agreement, is not a debt of this state or any state
  agency or political subdivision of this state, and does not
  constitute a pledge of the faith and credit of this state or any
  state agency or political subdivision of this state.
         (c)  Each public security, and any related credit agreement,
  issued under this chapter must state on the security's face that:
               (1)  neither the state nor a state agency, political
  corporation, or political subdivision of the state is obligated to
  pay the principal of or interest on the public security except as
  provided by this subchapter; and
               (2)  neither the faith and credit nor the taxing power
  of the state or any state agency, political corporation, or
  political subdivision of the state is pledged to the payment of the
  principal of or interest on the public security.
         Sec. 2210.615.  STATE NOT TO IMPAIR PUBLIC SECURITY
  OBLIGATIONS. If public securities under this subchapter are
  outstanding, the state may not:
               (1)  take action to limit or restrict the rights of the
  association to fulfill its responsibility to pay public security
  obligations; or
               (2)  in any way impair the rights and remedies of the
  public security owners until the public securities are fully
  discharged.
         Sec. 2210.616.  ENFORCEMENT BY MANDAMUS. A writ of mandamus
  and any other legal and equitable remedies are available to a party
  at interest to require the association or another party to fulfill
  an agreement and to perform functions and duties under:
               (1)  this subchapter;
               (2)  the Texas Constitution; or
               (3)  a relevant public security resolution.
         Sec. 2210.617.  EXEMPTION FROM TAXATION. A public security
  issued under this subchapter, any transaction relating to the
  public security, and profits made from the sale of the public
  security are exempt from taxation by this state or by a municipality
  or other political subdivision of this state.
         Sec. 2210.618.  NO PERSONAL LIABILITY. The members of the
  association, association employees, the board, the employees of the
  Texas Public Finance Authority, the commissioner, and department
  employees are not personally liable as a result of exercising the
  rights and responsibilities granted under this subchapter.
         Sec. 2210.619.  AUTHORIZED INVESTMENTS.  Public securities
  issued under this subchapter are authorized investments under:
               (1)  Subchapter B, Chapter 424;
               (2)  Subchapter C, Chapter 425; and
               (3)  Sections 425.203-425.213.
         SECTION 34.  Section 2211.104, Insurance Code, is amended to
  read as follows:
         Sec. 2211.104.  ADDITIONAL ASSESSMENT IN EVENT OF DEFICIT;
  PREMIUM SURCHARGE AUTHORIZED.  (a)  Except as provided by
  Subsection (f), if [If] the association incurs a deficit, the
  association, at the commissioner's direction, shall:
               (1)  request the issuance of public securities as
  authorized by Subchapter E; or
               (2)  assess participating insurers in accordance with
  this section.
         (b)  Except as provided by Subsection (f), as [As]
  reimbursement for assessments paid under this section or service
  fees paid under Section 2211.209, each insurer may charge a premium
  surcharge on every property insurance policy insuring property in
  this state that the insurer issues, the effective date of which is
  within the three-year period beginning on the 90th day after the
  date of the assessment or the 90th day after the date the service
  fee under Section 2211.209 is paid, as applicable.
         (c)  Except as provided by Subsection (f), insurers [The
  insurer] shall compute the amount of the surcharge under Subsection
  (b) as a uniform percentage of the premium on each policy described
  by Subsection (b). The percentage must be equal to one-third of the
  ratio of the amount of the participating insurer's assessment or
  service fee payment to the amount of the insurer's direct earned
  premiums, as reported to the department in the insurer's financial
  statement for the calendar year preceding the year in which the
  assessment or service fee payment is made so that, over the
  three-year period, the aggregate of all surcharges by the insurer
  under this section is at least equal to the amount of the assessment
  or service fee payment.
         (d)  The amount of any assessment paid and surcharged under
  this section may be carried by the insurer as an admitted asset of
  the insurer for all purposes, including exhibition in annual
  statements under Section 862.001, until collected.
         (e)  The commissioner shall adopt rules and procedures as
  necessary to implement this section.
         (f)  In the event of an occurrence or series of occurrences
  resulting in deficits for the association and the Texas Windstorm
  Insurance Association, the commissioner may adopt rules in the
  manner provided by Subchapter A, Chapter 36, to provide for the
  coordinated recoupment of those deficits. The rules may not
  provide for a recoupment of assessments through premium tax
  credits.
         SECTION 35.  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 36.  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 37.  The following laws are repealed:
               (1)  Sections 2210.003(5) and (12), Insurance Code;
               (2)  Section 2210.059, Insurance Code;
               (3)  Section 2210.356, Insurance Code; and
               (4)  Subchapters G and I, Chapter 2210, Insurance Code.
         SECTION 38.  (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, not later than 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 39.  The commissioner of insurance shall adopt rules
  as required by Chapter 2210, Insurance Code, as amended by this Act,
  not later than the 180th day after the effective date of this Act.
         SECTION 40.  Section 2210.202(a), Insurance Code, as amended
  by this Act, applies to an application for insurance coverage
  submitted to the Texas Windstorm Insurance Association on or after
  the effective date of this Act.
         SECTION 41.  Section 2210.251, Insurance Code, as amended by
  this Act, applies to an inspection conducted by the Texas Windstorm
  Insurance Association on or after the effective date of this Act.
  Except as otherwise specifically provided by that section, a person
  whose insurable property has been inspected by the Texas Department
  of Insurance and is in compliance with Section 2210.251, Insurance
  Code, as that section existed immediately before the effective date
  of this Act, is not required to obtain an inspection from the Texas
  Windstorm Insurance Association to remain eligible for insurance
  coverage through that association.
         SECTION 42.  (a)  In accordance with Section 311.031(c),
  Government Code, which gives effect to a substantive amendment
  enacted by the same legislature that codifies the amended statute,
  the text of Section 2211.104, Insurance Code, as set out in Section
  34 of this Act, gives effect to changes made by Chapter 1082, Acts
  of the 79th Legislature, Regular Session, 2005.
         (b)  To the extent of any conflict, this Act prevails over
  another Act of the 80th Legislature, Regular Session, 2007,
  relating to nonsubstantive additions and corrections in enacted
  codes.
         SECTION 43.  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.
 
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