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A BILL TO BE ENTITLED
|
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AN ACT
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relating to operation of the Texas Windstorm Insurance Association |
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and the Texas FAIR Plan Association, including funding of coverage |
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for certain catastrophic events through the issuance of public |
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securities. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 2210.003, Insurance Code, is amended by |
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adding Subdivision (3-a) to read as follows: |
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(3-a) "Fair share company" means a member of the |
|
association if, for any applicable calendar year, the ratio of that |
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member's net direct premium written in the catastrophe area to all |
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members' net direct premium written in the catastrophe area equals |
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or exceeds the ratio of that member's net direct premium written |
|
statewide to all members' net direct premium written statewide for |
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fire and allied lines insurance, homeowners insurance, farm and |
|
ranch owners insurance, and commercial multiperil insurance. |
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SECTION 2. Section 2210.005, Insurance Code, is amended by |
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adding Subsections (e) through (h) to read as follows: |
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(e) After at least 10 days' notice and a hearing, the |
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commissioner may determine, unless such a determination creates an |
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adverse impact to the exposure of the association, that windstorm |
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and hail insurance or fire and explosion insurance is not |
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reasonably available to a group that is located in a specified area |
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of the state and that has similar risk characteristics. On such a |
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determination by the commissioner, that group of risks shall be |
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considered the same as a risk that is located in a catastrophe area |
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or an inadequate fire insurance area for all purposes under this |
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chapter. |
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(f) The commissioner shall revoke a determination made |
|
under Subsection (e) if the commissioner determines, after at least |
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10 days' notice and a hearing, that the applicable insurance |
|
coverage is no longer reasonably unavailable to a group determined |
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to be eligible under Subsection (e). |
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(g) If the association determines that windstorm and hail |
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insurance or fire and explosion insurance, as applicable, is no |
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longer reasonably unavailable to a group determined to be eligible |
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under Subsection (e), the association may request in writing that |
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the commissioner revoke the determination. After at least 10 days' |
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notice and a hearing, but not later than the 30th day after the date |
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of the hearing, the commissioner shall: |
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(1) approve the request and revoke the determination; |
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or |
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(2) reject the request. |
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(h) The commissioner may adopt reasonable and necessary |
|
rules in the manner prescribed by Subchapter A, Chapter 36, to |
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implement this section. |
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SECTION 3. Section 2210.008, Insurance Code, is amended to |
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read as follows: |
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Sec. 2210.008. DEPARTMENT ORDERS; RULEMAKING AUTHORITY. |
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(a) The [After notice and hearing as provided by Subsection (b),
|
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the] commissioner may issue any orders that the commissioner |
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considers necessary to implement this chapter [, including orders
|
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regarding maximum rates, competitive rates, and policy forms]. |
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(b) The commissioner may adopt rules in the manner |
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prescribed by Subchapter A, Chapter 36, as reasonable and necessary |
|
to implement this chapter. [Before the commissioner adopts an
|
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order, the department shall post notice of the hearing on the order
|
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at the secretary of state's office in Austin and shall hold a
|
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hearing to consider the proposed order. Any person may appear at
|
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the hearing and testify for or against the adoption of the order.] |
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SECTION 4. Section 2210.052, Insurance Code, is amended by |
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amending Subsections (a) and (d) and adding Subsection (e) to read |
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as follows: |
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(a) Each member of the association shall participate in |
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insured losses and operating expenses of the association, in excess |
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of premium and other revenue [the writings, expenses, profits, and
|
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losses] of the association, in the proportion that the net direct |
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premiums of that member during the preceding calendar year bears to |
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the aggregate net direct premiums by all members of the |
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association, as determined using the information provided under |
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Subsection (b). |
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(d) Notwithstanding Subsection (a), a member, in accordance |
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with the plan of operation, is entitled to receive credit for |
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similar insurance voluntarily written in areas [an area] designated |
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by the commissioner. The member's participation in the insured |
|
losses and operating expenses of the association in excess of |
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premium and other revenue [writings] of the association shall be |
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reduced in accordance with the plan of operation. |
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(e) Notwithstanding Subsections (a)-(d), an insurer that |
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becomes a member of the association and that has not previously been |
|
a member of the association is not subject to participation in any |
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insured losses and operating expenses of the association in excess |
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of premium and other revenue of the association until the second |
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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 |
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additional period, not to exceed three years, beyond the initial |
|
exemption under this subsection. |
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SECTION 5. Section 2210.058, Insurance Code, is amended to |
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read as follows: |
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Sec. 2210.058. PAYMENT OF EXCESS LOSSES; PREMIUM TAX |
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CREDIT. (a) If[, in any calendar year,] an occurrence or series of |
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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. |
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(b) For each occurrence, an amount equal to a maximum of 2.5 |
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percent of all the direct premiums written by all the members of the |
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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 [follows:
|
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[(1)$100 million shall be] assessed against the |
|
members of the association and the Texas FAIR Plan Association as |
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provided by Subsection (h). The association may not assess members |
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of the association and the Texas FAIR Plan Association under this |
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subsection more than twice in any calendar year. [(b) ;] |
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(c) Losses [(2)losses] in excess of those paid under |
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Subsection (b) [$100 million] shall be paid as provided by this |
|
subsection 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 |
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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. |
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(d) Any [and any reinsurance program established by the
|
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association;
|
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[(3)for] losses in excess of those paid under |
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Subsections (b) and (c) [those paid under Subdivisions (1) and (2),
|
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an additional $200 million] shall be paid with proceeds from public |
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securities issued by the association in accordance with Subchapter |
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M before the date of any occurrence that results in insured losses |
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under Subsection (a), as provided by Subsection (j). |
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(e) For [assessed against the members of the association, as
|
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provided by Subsection (b); and
|
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[(4)] losses in excess of those paid under Subsections |
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(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, |
|
[Subdivisions (1), (2), and (3)] shall be computed and assessed |
|
against the members of the association and the Texas FAIR Plan |
|
Association, as provided by Subsection (h) [(b)]. The association |
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may not assess members of the association and the Texas FAIR Plan |
|
Association under this subsection more than twice in any calendar |
|
year. |
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(f) Any losses in excess of those paid under Subsections |
|
(b)-(e) shall be paid from proceeds from public securities issued |
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by the association in accordance with Subchapter M on or after the |
|
date of any occurrence that results in insured losses under |
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Subsection (a), as provided by Subsection (k). |
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(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). |
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(h) [(b)] The proportion of the losses allocable to each |
|
insurer and the Texas FAIR Plan Association under Subsections (b), |
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(e), and (g) [(a)(1), (3), and (4)] shall be determined in the |
|
manner used to determine each insurer's participation in the |
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association for the year under Section 2210.052, and as to the Texas |
|
FAIR Plan Association, as provided by the plan of operation. |
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(i) [(c)] An insurer and the Texas FAIR Plan Association may |
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credit an amount paid in accordance with Subsection (g) [(a)(4)] in |
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a calendar year against the insurer's and Texas FAIR Plan |
|
Association'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 assessment [claims]. The |
|
balance of payments made by the insurer and the Texas FAIR Plan |
|
Association and not claimed as a premium tax credit may be reflected |
|
in the books and records of the insurer and the Texas FAIR Plan |
|
Association as an admitted asset of the insurer and the Texas FAIR |
|
Plan Association for all purposes, including exhibition in an |
|
annual statement under Section 862.001. |
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(j) Public securities described by Subsection (d) may be |
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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 |
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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. |
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(k) Public securities described by Subsection (f) may be |
|
issued in principal amounts not to exceed $5 billion. |
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(l) 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. |
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(m) The commissioner may adopt rules in the manner provided |
|
by Subchapter A, Chapter 36, as necessary to implement this |
|
section. |
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SECTION 6. Section 2210.059, Insurance Code, is amended to |
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read as follows: |
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Sec. 2210.059. NOTIFICATION REGARDING TAX CREDITS. (a) |
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The association shall immediately notify the department if an |
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occurrence or series of occurrences in a catastrophe area results |
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in insured losses that result in a tax credit under Section |
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2210.058(i) [2210.058(c)] in a calendar year. |
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(b) On receipt of notice under Subsection (a), the |
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department shall immediately notify the governor and the |
|
appropriate committees of each house of the legislature of the |
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amount of insured losses eligible for tax credits under Section |
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2210.058(i) [2210.058(c)]. |
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SECTION 7. Section 2210.060(c), Insurance Code, is amended |
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to read as follows: |
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(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 to |
|
read as follows: |
|
Sec. 2210.102. COMPOSITION. (a) The board of directors is |
|
composed of the following 11 [nine] members appointed by the |
|
commissioner: |
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(1) five members who represent the interests of |
|
[representatives of different] insurers [who are members of the
|
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association, elected by the members as provided by the plan of
|
|
operation]; |
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(2) four members who represent the interests of the |
|
[two] public: |
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(A) two of whom [representatives who are
|
|
nominated by the office of public insurance counsel and who], as of |
|
the date of the appointment: |
|
(i) [(A)] reside in a catastrophe area; and |
|
(ii) [(B)] are policyholders of the |
|
association; and |
|
(B) two of whom, as of the date of the |
|
appointment: |
|
(i) reside outside a catastrophe area; and |
|
(ii) are not policyholders of the |
|
association; and |
|
(3) two members who are general property and casualty |
|
agents licensed under this code: |
|
(A) who are not captive agents; |
|
(B) who have demonstrated experience in the |
|
association; and |
|
(C) [(B)] whose principal offices, as of the date |
|
of the appointment, are located in a catastrophe area. |
|
(b) 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. |
|
(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 Subsection (a). [The persons
|
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appointed under Subsections (a)(2) and (3) must be from different
|
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counties.] |
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SECTION 9. 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 10. Section 2210.251, Insurance Code, is amended by |
|
adding Subsections (i), (j), and (k) to read as follows: |
|
(i) The department may charge a reasonable fee for each |
|
inspection in an amount set by commissioner rule. All fees |
|
collected under this section shall be deposited to the credit of the |
|
Texas Department of Insurance operating account. |
|
(j) 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) transfer to the department assets as considered |
|
appropriate and necessary by the association to fund inspections, |
|
including the funding of expenses for: |
|
(A) independent contractors hired by the |
|
department to serve as temporary qualified inspectors; and |
|
(B) other persons designated by the department 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. |
|
(k) The commissioner may adopt rules in the manner |
|
prescribed by Subchapter A, Chapter 36, as necessary to implement |
|
this section. |
|
SECTION 11. Subchapter F, Chapter 2210, Insurance Code, is |
|
amended by adding Section 2210.2521 to read as follows: |
|
Sec. 2210.2521. MANDATORY COMPLIANCE WITH CERTAIN BUILDING |
|
CODES. Notwithstanding any other provision of this chapter, all |
|
construction of, and repairs and additions to, property located in |
|
the catastrophe area begun on or after January 1, 2008, must be in |
|
compliance with the applicable building code standards set forth in |
|
the plan of operation. |
|
SECTION 12. Section 2210.351, Insurance Code, is amended by |
|
amending Subsection (c) and adding Subsection (f) 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. |
|
(f) The association's rates must include a premium |
|
surcharge in the amount of 10 percent of premium for nonhomestead |
|
residential properties. |
|
SECTION 13. 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 14. 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 15. Section 2210.355, Insurance Code, is amended by |
|
adding Subsections (h), (i), and (j) to read as follows: |
|
(h) The effect of the use of hurricane models in determining |
|
the catastrophe element of the association's rates may not increase |
|
the association's rates by more than five percent within any |
|
calendar year. This subsection does not apply to the reinsurance |
|
cost element of the association's rates. |
|
(i) The commissioner may limit any increase in the |
|
reinsurance cost element of the association's rates after |
|
consideration of the effect of the use of hurricane models in |
|
determining the catastrophe element of the association's rates. |
|
(j) The association may establish rating territories and |
|
may vary rates among the territories. |
|
SECTION 16. Section 2210.452, Insurance Code, is amended by |
|
amending Subsections (a) and (c) and adding Subsection (f) 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. |
|
(f) For each calendar year in which an insurer that is a |
|
member of the association does not qualify as a fair share company, |
|
the insurer must pay an amount equal to 0.5 percent of the insurer's |
|
net direct premium for fire insurance, allied lines insurance, |
|
homeowners insurance, farm and ranch owners insurance, and |
|
commercial multiperil insurance to the association in the manner |
|
provided by the plan of operation. The association shall deposit |
|
all amounts paid under this subsection in the trust fund. |
|
SECTION 17. 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) With the approval of the commissioner [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. |
|
SECTION 18. 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, hail, and fire insurance |
|
through the association in certain designated portions of the state |
|
is for the benefit of the public and in furtherance of a public |
|
purpose. |
|
Sec. 2210.602. DEFINITIONS. In this subchapter: |
|
(1) "Board" means the board of directors of the Texas |
|
Public Finance Authority. |
|
(2) "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. |
|
(3) "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. |
|
(4) "Post-event public securities" means public |
|
securities authorized to be issued on or after the occurrence of a |
|
catastrophic event. |
|
(5) "Pre-event public securities" means public |
|
securities authorized to be issued before the occurrence of a |
|
catastrophic event. |
|
(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 |
|
pre-event or post-event public securities. |
|
(b) The association shall specify in the association's |
|
request to the board the maximum principal amount of the public |
|
securities, not to exceed $500 million for any separate issue, and |
|
the maximum term of the public securities, not to exceed 10 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, 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. PRE-EVENT 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 pre-event 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. The premium surcharge assessed |
|
under this section may not exceed six percent of premium, and may |
|
not cumulatively exceed 10 percent of premium over the course of a |
|
12-month period beginning with the first assessment of the |
|
surcharge. |
|
(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. POST-EVENT 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 post-event 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 3.2 |
|
percent of premium. |
|
(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 19. 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 20. 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 21. 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 22. The following laws are repealed: |
|
(1) Section 2210.103, Insurance Code; and |
|
(2) Section 2210.356, Insurance Code. |
|
SECTION 23. (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 24. (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 |
|
19 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 25. 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. |