81R7832 TJS-F

By: Hunter H.B. No. 1219

A BILL TO BE ENTITLED

AN ACT

relating to the operation of the Texas Windstorm Insurance Association.

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

SECTION 1. Section 2210.052, Insurance Code, is amended by amending Subsections (a) and (d) to read as follows:

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

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

SECTION 2. 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 3. 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:

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

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

[(A)] reside in a catastrophe area[;] and

[(B)] are policyholders of the association as of the date of the appointment; and

(3) two property and casualty agents, each of whom must hold a license under Chapter 4051 as a general property and casualty agent or a personal lines property and casualty agent, and at least one of whom must:

(A) have demonstrated experience in the association; and

(B) maintain the agent's principal office, as of the date of the appointment, in a catastrophe area[; and

[(C) hold a license under Chapter 4051 as a general property and casualty agent or a personal lines property and casualty agent].

(b) Each member of the board of directors who represents the interests of insurers must be a full-time employee of an authorized insurer that is a member of the association at the time of the appointment [The persons appointed under Subsections (a)(2) and (3) must be from different counties].

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

SECTION 4. Section 2210.103(a), Insurance Code, is amended to reads as follows:

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

SECTION 5. Section 2210.452, Insurance Code, is amended by amending Subsections (a) and (c) 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(a); and

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

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

SECTION 6. Section 2210.453, Insurance Code, is amended to read as follows:

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

(1) make payments into the trust fund; or

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

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

SECTION 7. (a) The board of directors of the Texas Windstorm Insurance Association established under Section 2210.102, Insurance Code, as that section existed before amendment by this Act, is abolished on the 30th day after the effective date of this Act.

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

(c) The term of a person who is serving as a member of the board of directors of the Texas Windstorm Insurance Association immediately before the abolition of that board under Subsection (a) of this section expires on the 30th day after the effective date of this Act. Such a person is eligible for appointment by the commissioner of insurance to the new board of directors of the Texas Windstorm Insurance Association under Section 2210.102, Insurance Code, as amended by this Act.

SECTION 8. 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, 2009.