81R8359 PB-F
 
  By: Eiland H.B. No. 2487
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the establishment, funding, and operation of the Texas
  natural disaster catastrophe fund and the disaster preparedness and
  mitigation grant council.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Subtitle A, Title 10, Insurance Code, is amended
  by adding Chapter 1809 to read as follows:
  CHAPTER 1809. NATURAL DISASTER CATASTROPHE FUND
  SUBCHAPTER A. GENERAL PROVISIONS
         Sec. 1809.001.  SHORT TITLE. This chapter may be cited as
  the Texas Natural Disaster Catastrophe Fund Act.
         Sec. 1809.002.  FINDINGS; PURPOSE. (a) The legislature
  finds that there is a compelling state interest in maintaining a
  viable and orderly private sector market for property insurance in
  this state.  To the extent that the private sector is unable to
  maintain such a market in this state, state actions to maintain such
  a market are valid and necessary exercises of the police power.
         (b)  The legislature finds that, as a result of unprecedented
  levels of insured losses from natural disasters in recent years,
  numerous insurers have determined that in order to protect their
  solvency, it is necessary for those insurers to reduce their
  exposure to losses from natural disasters. The instability of the
  world reinsurance market, also caused in part by these events, has
  also increased the pressure on insurers to reduce their
  catastrophic exposures.
         (c)  The legislature finds that mortgages require reliable
  property insurance, and the unavailability of reliable property
  insurance would make most real estate transactions impossible. In
  addition, the public health, safety, and welfare demand that
  structures damaged or destroyed in a catastrophe be repaired or
  reconstructed as soon as possible.  Therefore, the inability of the
  private sector insurance and reinsurance markets to maintain
  sufficient capacity to enable residents of this state to obtain
  property insurance coverage in the private sector endangers the
  economy of this state and endangers the public health, safety, and
  welfare.  Accordingly, state action to correct for this inability
  of the private sector constitutes a valid and necessary public and
  governmental purpose.
         (d)  The legislature finds that the financial impairments
  resulting from recent natural disasters demonstrate that many
  property insurers are unable or unwilling to maintain reserves,
  surplus, and reinsurance sufficient to enable the insurers to pay
  all claims in full in the event of a major natural disaster.  State
  action is therefore necessary to protect the public from an
  insurer's unwillingness or inability to maintain sufficient
  reserves, surplus, and reinsurance.
         (e)  The legislature finds that a state program to provide
  reimbursement to insurers for a portion of their catastrophic
  losses will create additional insurance capacity sufficient to
  ameliorate the current dangers to this state's economy and to the
  public health, safety, and welfare.
         (f)  It is essential to the efficient functioning of a state
  program to increase insurance capacity that revenues received be
  exempt from federal taxation.  It is therefore the intent of the
  legislature that the program under this chapter be structured as a
  state trust fund under the control of the department and operate
  exclusively for the purpose of protecting and advancing the state's
  interest in maintaining insurance capacity in this state.
         Sec. 1809.003.  DEFINITIONS. In this chapter:
               (1)  "Actuarially indicated" means, with respect to
  premiums paid by insurers for reimbursement provided by the fund,
  an amount determined according to principles of actuarial science
  to be adequate, but not excessive, in the aggregate, to pay current
  and future obligations and expenses of the fund, including
  additional amounts if needed to retire public securities issued
  under Subchapter H, and determined according to principles of
  actuarial science to reflect each insurer's relative exposure to
  losses from covered events.
               (2)  "Covered event" means a hurricane, tornado, or
  other type of natural disaster, as specified by rule by the
  commissioner, that results in insured losses in this state and is
  covered by the fund.
               (3)  "Covered policy" means a residential property
  insurance policy, or any other policy covering a residential
  structure or the contents of such a structure that is issued by an
  insurer authorized to engage in the business of residential
  property insurance in this state. The term does not include a
  reinsurance agreement or any policy that excludes coverage for a
  peril described by Subdivision (2).
               (4)  "Fund" means the Texas natural disaster
  catastrophe fund.
               (5)  "Insurer" means an insurance company, reciprocal
  or interinsurance exchange, mutual insurance company, capital
  stock company, county mutual insurance company, farm mutual
  insurance company, Lloyd's plan, or other legal entity authorized
  to write residential property insurance in this state.  The term
  includes an affiliate, as described by Section 823.003(a), if that
  affiliate is authorized to write and is writing residential
  property insurance in this state.  The term also includes:
                     (A)  an eligible surplus lines insurer regulated
  under Chapter 981;
                     (B)  the Texas Windstorm Insurance Association
  under Chapter 2210; and
                     (C)  the FAIR Plan Association under Chapter 2211.
               (6)  "Losses" means direct incurred losses under
  covered policies, other than losses attributable to additional
  living expenses coverages and loss adjustment expenses.
               (7)  "Retention" means the amount of losses below which
  an insurer is not entitled to reimbursement from the fund.
  [Sections 1809.004-1809.050 reserved for expansion]
  SUBCHAPTER B. POWERS AND DUTIES OF DEPARTMENT
  AND COMMISSIONER
         Sec. 1809.051.  RULEMAKING. (a) The commissioner shall
  adopt rules in the manner prescribed by Subchapter A, Chapter 36, as
  reasonable and necessary to implement this chapter.
         (b)  Rules adopted under Subsection (a) must:
               (1)  conform to the legislature's specific intent in
  establishing the fund, as provided by Section 1809.002; and
               (2)  enhance the fund's potential ability to respond to
  claims for covered events.
         (c)  Rules adopted under Subsection (a) must contain general
  provisions to allow the rules to be applied with enough reasonable
  flexibility to accommodate insurers in situations of an unusual
  nature or if undue hardship may result. The flexibility authorized
  under this subsection may not in any way impair, override,
  supersede, or constrain the public purpose of the fund, and must be
  consistent with sound insurance practices.
         Sec. 1809.052.  ALTERNATE REPORTING METHODS AUTHORIZED. The
  department may allow insurers to use alternative methods of
  reporting to comply with reporting requirements adopted under this
  chapter if the commissioner determines that:
               (1)  use of those alternate methods does not adversely
  affect proper administration of the fund; and
               (2)  the alternate methods produce data that is
  consistent for the purposes of this chapter.
         Sec. 1809.053.  REPROCESSING FEE. To ensure the equitable
  operation of the fund, the department may impose a reasonable fee on
  an insurer to recover any costs incurred by the department in
  reprocessing inaccurate, incomplete, or untimely exposure data
  submitted by the insurer.
         Sec. 1809.054.  REINSURANCE ADVISORY COUNCIL. (a)  To
  provide the department with information and advice in connection
  with the department's duties under this chapter, the commissioner
  shall appoint a seven-member reinsurance advisory council composed
  as follows:
               (1)  an actuary;
               (2)  a meteorologist;
               (3)  a representative of insurers;
               (4)  a representative of insurance agents;
               (5)  a representative of reinsurers; and
               (6)  two public members.
         (b)  The chair of the Senate Business and Commerce Committee
  and the chair of the House Insurance Committee serve as ex officio
  members of the advisory council.
         (c)  Appointed members of the advisory council serve at the
  pleasure of the commissioner.
         (d)  An appointed member of the advisory council is not
  entitled to compensation, but is entitled to reimbursement for
  traveling expenses incurred in performing duties as a member of the
  advisory council up to the limit provided by the General
  Appropriations Act.
         (e)  The advisory council is not subject to Chapter 2110,
  Government Code.
         Sec. 1809.055.  EFFECT OF CREATION OF FEDERAL OR MULTISTATE
  PROGRAM.  On the creation of a federal or multistate catastrophic
  insurance or reinsurance program intended to serve purposes similar
  to the purposes of the fund established under this chapter, the
  department shall promptly make recommendations to the legislature
  regarding:
               (1)  coordination with the federal or multistate
  program;
               (2)  termination of the fund; or
               (3)  other actions as the commissioner determines to be
  appropriate.
  [Sections 1809.056-1809.100 reserved for expansion]
  SUBCHAPTER C. FUND
         Sec. 1809.101.  ESTABLISHMENT OF FUND. (a) The Texas
  natural disaster catastrophe fund is a trust fund outside the state
  treasury in the custody of the comptroller. The department shall
  administer the fund.
         (b)  Money in the fund may not be spent, loaned, or
  appropriated except to pay:
               (1)  obligations of the fund that arise out of
  reimbursement contracts entered into under Subchapter E;
               (2)  debts, including obligations arising out of public
  securities issued under Subchapter H;
               (3)  costs of the mitigation program under Section
  1809.103;
               (4)  costs of procuring reinsurance; and
               (5)  costs of administration of the fund.
         (c)  The comptroller shall invest the money in the fund in
  the manner provided by law for investment of state funds. Except as
  otherwise provided by this chapter, earnings from all investments
  shall be retained in the fund.
         (d)  The department may employ staff or contract with
  professionals as the commissioner considers necessary for the
  administration of the fund.
         Sec. 1809.102.  BORROWING AUTHORIZED. In addition to using
  public securities under Subchapter H, the department may borrow
  from any market sources at prevailing interest rates.
         Sec. 1809.103.  MITIGATION PROGRAM; USE OF FUND INVESTMENT
  INCOME. (a) On certification by the comptroller, an amount not to
  exceed 35 percent of the investment income of the fund for the prior
  fiscal year shall be transferred to the disaster preparedness and
  mitigation grant council established under Section 418.075,
  Government Code.
         (b)  Notwithstanding Subsection (a), money is not available
  for transfer under this section if the comptroller determines that
  a transfer of investment income from the fund would jeopardize the
  actuarial soundness of the fund.
         Sec. 1809.104.  SEMIANNUAL STATEMENT. In May and October of
  each year, the comptroller shall publish in the Texas Register a
  statement of the fund's anticipated borrowing capacity and the
  balance of the fund as of the date of the statement.
         Sec. 1809.105.  REINSURANCE. The department may procure
  reinsurance from reinsurers authorized under Subtitle F, Title 4
  for the purpose of maximizing the capacity of the fund.
         Sec. 1809.106.  REVERSION OF FUND ASSETS ON TERMINATION.
  The fund and the duties of the comptroller and the department under
  this chapter may be terminated only by law. On termination of the
  fund, all assets of the fund shall revert to the general revenue
  fund.
         Sec. 1809.107.  ADVANCE PREMIUM PAYMENT.  (a)  To provide
  startup money for the administration of the fund, each insurer
  shall pay to the fund an advance premium payment of $1,000.  The
  department shall collect the advance premium payments required by
  this section for deposit in the fund.  The insurer shall receive a
  credit against future premiums for the advance payment.
         (b)  This section expires September 1, 2011.
  [Sections 1809.108-1809.150 reserved for expansion]
  SUBCHAPTER D.  COMPUTATION OF INSURER'S RETENTION
         Sec. 1809.151.  COMPUTATION OF INSURER'S RETENTION. For
  purposes of this chapter, an insurer's retention shall be computed
  as provided by this subchapter.
         Sec. 1809.152.  RETENTION MULTIPLES.  (a)  The department
  shall compute and report to each insurer the retention multiples
  for each year.
         (b)  For the contract year beginning in 2009, the retention
  multiple is equal to $2 billion, divided by the total estimated
  reimbursement premium for the contract year. For subsequent years,
  the retention multiple is equal to $2 billion, adjusted to reflect
  the percentage growth in premium for covered policies since the
  date of the initial contracts entered into under this chapter,
  divided by the total estimated reimbursement premium for the
  contract year.
         Sec. 1809.153.  INSURER ELECTION; PROVISIONAL AND ACTUAL
  RETENTION. (a) The retention multiple determined under Section
  1809.152(b) shall be adjusted to reflect the coverage level elected
  by the insurer under Section 1809.202. For insurers electing:
               (1)  the 90 percent coverage level, the adjusted
  retention multiple is 100 percent of the amount determined under
  Section 1809.152(b);
               (2)  the 75 percent coverage level, the retention
  multiple is 120 percent of the amount determined under Section
  1809.152(b); and
               (3)  the 45 percent coverage level, the adjusted
  retention multiple is 200 percent of the amount determined under
  Section 1809.152(b).
         (b)  An insurer shall determine the insurer's:
               (1)  provisional retention by multiplying the insurer's
  provisional reimbursement premium by the applicable adjusted
  retention multiple; and
               (2)  actual retention by multiplying the insurer's
  actual reimbursement premium by the applicable adjusted retention
  multiple.
  [Sections 1809.154-1809.200 reserved for expansion]
  SUBCHAPTER E. REIMBURSEMENT CONTRACTS
         Sec. 1809.201.  REIMBURSEMENT CONTRACT REQUIRED.  As a
  condition of engaging in the business of insurance in this state,
  each insurer that writes covered policies shall enter into a
  contract with the department under which the department shall
  provide to the insurer the reimbursement described by Section
  1809.202 in exchange for the reimbursement premium paid to the fund
  by the insurer under Subchapter G.
         Sec. 1809.202.  REIMBURSEMENT PERCENTAGES. (a) A
  reimbursement contract must contain a promise by the department to
  reimburse the insurer, as provided by Subsection (b), for a
  percentage equal to 45 percent, 75 percent, or 90 percent of the
  insurer's losses from each covered event in excess of the insurer's
  retention, plus five percent of the reimbursed losses to cover loss
  adjustment expenses.
         (b)  The insurer must elect one of the payment percentages
  specified under Subsection (a). On renewal of a reimbursement
  contract, the insurer may elect:
               (1)  a lower payment percentage, if no public
  securities under Subchapter H issued after a covered event are
  outstanding; or
               (2)  a higher payment percentage, if the insurer pays
  to the fund an actuarially appropriate equalization charge as
  determined by the department.
         (c)  All members of an insurer group must elect the same
  payment percentage.
         (d)  A joint underwriting association or assigned risk plan
  established under this code must elect the 90 percent payment
  percentage.
         Sec. 1809.203.  EFFECT OF REINSURANCE; OTHER RECOVERIES.
  (a) A reimbursement contract must provide that reimbursement
  amounts may not be reduced by reinsurance paid or payable to the
  insurer from other sources.
         (b)  Recoveries from another source, together with
  reimbursements under the contract, may not exceed 100 percent of
  the insurer's losses from covered events. If those recoveries and
  reimbursements exceed 100 percent of the insurer's losses from
  covered events, and if an agreement between the insurer and the
  reinsurer to the contrary does not exist, any amount in excess of
  100 percent of the insurer's losses must be deposited in the fund.
         Sec. 1809.204.  DEPARTMENT OBLIGATION. A reimbursement
  contract must provide that the obligation of the department with
  respect to all contracts covering a particular year may not exceed
  the current balance of the fund, together with the maximum amount
  that the department is able to raise through the issuance of public
  securities under Subchapter H.
         Sec. 1809.205.  ANNUAL NOTIFICATION TO INSURERS.  (a) A
  reimbursement contract must require the department to notify each
  insurer annually of:
               (1)  the fund's anticipated borrowing capacity for the
  subsequent year;
               (2)  the balance of the fund as of the date of the
  notification; and
               (3)  the insurer's estimated share of total
  reimbursement to be paid to the fund.
         (b)  For all regulatory and reinsurance purposes, an insurer
  may compute the insurer's projected payout from the fund as the
  insurer's share of the total fund premium multiplied by the sum of
  the fund balance and bonding capacity as reported under this
  section.
         Sec. 1809.206.  INSURER QUARTERLY REPORTS; PAYMENT OF
  REIMBURSEMENT BY DEPARTMENT. (a) The reimbursement contract shall
  require each insurer to report to the department on December 31 of
  each year and quarterly thereafter the insurer's losses from
  covered events for the year and the quarter.
         (b)  The department shall determine and pay, as soon as
  practicable after receiving a report under Subsection (a), the
  initial amount of reimbursement due and adjustments to that amount
  based on later loss information. Adjustments to reimbursement
  amounts shall require the department to pay, or the insurer to
  return, amounts reflecting the most recent computation of losses.
         Sec. 1809.207.  LOANS TO MAINTAIN INSURER SOLVENCY. (a)  
  Each reimbursement contract must provide that the department shall
  loan to an insurer, at market interest rates, the amounts necessary
  to maintain the solvency of the insurer if the insurer demonstrates
  to the satisfaction of the department that:
               (1)  the insurer is likely to qualify for reimbursement
  under the contract; and
               (2)  the immediate receipt of money is likely to
  prevent the insurer from becoming insolvent.
         (b)  A loan under Subsection (a) may not exceed an amount
  equal to 50 percent of the department's estimate of the
  reimbursement due the insurer. The insurer's reimbursement shall
  be reduced by an amount equal to the amount of the loan and interest
  on the loan.
         Sec. 1809.208.  EFFECT OF INSURER INSOLVENCY. (a) In this
  section, the "net amount of all reimbursement moneys" means the
  amount remaining after reimbursement for preliminary or duplicate
  payments owed to private reinsurers, or other inuring reinsurance
  payments to private reinsurers, that satisfy statutory or
  contractual obligations to those reinsurers of the insolvent
  insurer attributable to covered events. Notwithstanding any law to
  the contrary, a private reinsurer described by this subsection
  shall be reimbursed or otherwise paid before any payment to the
  Texas Property and Casualty Insurance Guaranty Association under
  Subsection (b).
         (b)  Each reimbursement contract must provide that in the
  event of the insolvency of an insurer, the fund shall pay the net
  amount of all reimbursement moneys owed to the insurer directly to
  the Texas Property and Casualty Insurance Guaranty Association for
  the benefit of the insurer's policyholders in this state. The
  guaranty association shall pay all claims up to the maximum amount
  permitted by Chapter 462. Any remaining moneys shall be paid pro
  rata to claims not fully satisfied.
  [Sections 1809.209-1809.250 reserved for expansion]
  SUBCHAPTER F. REIMBURSEMENT IF FUNDS INSUFFICIENT
         Sec. 1809.251.  REIMBURSEMENT IF FUNDS INSUFFICIENT. If the
  department determines that the current balance of the fund,
  together with the amount that the department determines possible to
  raise through public securities issued under Subchapter H, is
  insufficient to reimburse all insurers at the level promised under
  the reimbursement contracts, the department shall reimburse
  insurers as provided by this subchapter.
         Sec. 1809.252.  FIRST REIMBURSEMENT. (a) The department
  shall first reimburse each insurer writing covered policies that is
  determined by the department to:
               (1)  be in full compliance with this chapter;
               (2)  have surplus as to policyholders not exceeding $20
  million; and
               (3)  write at least 25 percent of the insurer's
  countrywide property insurance premium in this state.
         (b)  The amount of reimbursement made to an insurer under
  Subsection (a) must be the lesser of:
               (1)  $10 million; or
               (2)  an amount equal to 10 times the insurer's
  reimbursement premium for the current year.
         (c)  The amount of reimbursement paid under this section may
  not exceed the full amount of reimbursement promised by the
  reimbursement contract.
         (d)  This section does not apply to any contract year in
  which the year-end projected cash balance of the fund, exclusive of
  any bonding capacity of the fund, exceeds an amount set by the
  commissioner in consultation with the comptroller and the Texas
  Public Finance Authority.
         Sec. 1809.253.  SECOND REIMBURSEMENT. After reimbursements
  under Section 1809.252, the department shall pay to each insurer
  the amount of reimbursement owed to that insurer, up to an amount
  equal to the projected payout determined under Section 1809.254.
         Sec. 1809.254.  PRORATED REIMBURSEMENT. After
  reimbursements under Section 1809.252, the department shall
  establish the prorated reimbursement level at the highest level for
  which any remaining fund balance or public security proceeds are
  sufficient.
  [Sections 1809.255-1809.300 reserved for expansion]
  SUBCHAPTER G. REIMBURSEMENT PREMIUMS
         Sec. 1809.301.  PREMIUM PAYMENT. Each reimbursement
  contract shall require the insurer to pay to the fund annually an
  actuarially indicated premium for the promised reimbursement. In
  establishing the premium, the department shall consider the
  coverage level elected by the insurer under Section 1809.202 and
  any factors that tend to enhance the actuarial sophistication of
  ratemaking for the fund, including deductibles, type of
  construction, type of coverage provided, relative concentration of
  risks, and other factors considered appropriate by the
  commissioner.
         Sec. 1809.302.  FORMULA FOR PAYMENT OF PREMIUM. (a) The
  department shall select an independent consultant to develop a
  formula for determining the actuarially indicated premium to be
  paid to the fund. The formula must specify, for each zip code or
  other limited geographical area, the amount to be paid by an insurer
  for each $1,000 of insured value under covered policies in that zip
  code or other area.
         (b)  The department may, at any time, revise the formula in
  the manner provided by this section.
         Sec. 1809.303.  INSURER NOTICE; PAYMENT. (a) Not later than
  September 1 of each year, each insurer shall notify the department
  of the insurer's insured values under covered policies by zip code,
  as of June 30 of that year.
         (b)  Based on the reports received under Subsection (a), the
  department shall compute the premium due from each insurer, based
  on the formula adopted under Section 1809.302. The insurer shall
  pay the required annual premium under a periodic payment plan as
  specified in the reimbursement contract. The department shall
  provide for:
               (1)  payment of reimbursement premium in periodic
  installments; and
               (2)  the adjustment of provisional premium
  installments collected before submission of the exposure report to
  reflect data in the exposure report.
         (c)  All premiums paid to the fund under reimbursement
  contracts shall be treated as premium for approved reinsurance for
  all accounting and regulatory purposes.
         Sec. 1809.304.  EMERGENCY ASSESSMENT. (a) If the Texas
  Public Finance Authority determines that the amount of revenue
  produced under this subchapter through reimbursement premiums is
  insufficient to fund any public securities issued under Subchapter
  H as necessary to pay reimbursement at the levels promised in the
  reimbursement contracts, the authority shall direct the department
  to levy an emergency assessment on each insurer writing property
  and casualty insurance in this state.
         (b)  Except as otherwise provided by this subsection, each
  affected insurer shall pay to the fund, by July 1 of each year, an
  amount equal to two percent of the insurer's gross direct written
  premium for the prior year from all property and casualty insurance
  written in this state. If the governor has declared a state of
  emergency under Chapter 418, Government Code, because of the
  occurrence of a covered event, the amount of the emergency
  assessment under this subsection may be increased to an amount not
  exceeding four percent of that premium.
         (c)  The annual assessments under this section continue
  until the public securities issued with respect to which the
  assessment was imposed are retired.
         (d)  An insurer may not be subject to more than one
  assessment under this section.
         (e)  Any rate filing or portion of a rate filing reflecting a
  rate change attributable entirely to the assessment levied under
  this section shall be deemed approved when made, subject to the
  authority of the commissioner to require actuarial justification as
  to the adequacy of any rate at any time. If the rate filing reflects
  only a rate change attributable to the assessment under this
  section, the filing may consist of a certification so stating.
  [Sections 1809.305-1809.350 reserved for expansion]
  SUBCHAPTER H. PUBLIC SECURITIES PROGRAM
         Sec. 1809.351.  PURPOSE. The legislature finds that the
  issuance of public securities to fund a state program to provide
  reimbursement to insurers for a portion of their losses incurred as
  a result of certain natural disasters will create additional
  insurance capacity to benefit this state's economy and the public
  health, safety, and welfare.
         Sec. 1809.352.  DEFINITIONS. In this subchapter:
               (1)  "Board" means the board of directors of the Texas
  Public Finance Authority.
               (2)  "Public security" means a debt instrument or other
  public security issued by the Texas Public Finance Authority.
               (3)  "Public security resolution" means the resolution
  or order authorizing public securities to be issued under this
  subchapter.
         Sec. 1809.353.  APPLICABILITY OF OTHER LAWS. (a) To the
  extent consistent with this subchapter, Chapter 1232, Government
  Code, applies to public securities issued under this subchapter.
  In the event of a conflict, this subchapter controls.
         (b)  The following laws also apply to public securities
  issued under this subchapter to the extent consistent with this
  section:
               (1)  Chapters 1201, 1202, 1204, 1205, 1231, and 1371,
  Government Code; and
               (2)  Subchapter A, Chapter 1206, Government Code.
         Sec. 1809.354.  ISSUANCE OF PUBLIC SECURITIES AUTHORIZED.  
  (a) On the occurrence of a covered event and a determination by the
  comptroller that the amount in the fund will be insufficient to pay
  reimbursement at the levels promised under reimbursement contracts
  under this chapter, the commissioner shall request the Texas Public
  Finance Authority to issue public securities for the benefit of the
  fund.
         (b)  The Texas Public Finance Authority may issue, on behalf
  of the department, public securities in an amount sufficient to
  fund the obligations of the department under reimbursement
  contracts entered into under this chapter as determined by the
  department and approved by the commissioner after at least 10 days'
  notice and a hearing if a hearing is requested by any person within
  the 10-day notice period.
         Sec. 1809.355.  TERMS OF ISSUANCE. (a) Public securities
  issued under this subchapter may be issued at a public or private
  sale.
         (b)  Public securities must:
               (1)  be issued in the name of the department; and
               (2)  mature not more than 15 years after the date
  issued.
         Sec. 1809.356.  CONTENTS OF PUBLIC SECURITY RESOLUTION;
  ADMINISTRATION OF ACCOUNTS. (a) In a public security resolution,
  the board may:
               (1)  provide for the flow of funds and the
  establishment, maintenance, and investment of funds and special
  accounts with regard to the public securities, including an
  interest and sinking fund account, a reserve account, and other
  accounts; and
               (2)  make additional covenants with respect to the
  public securities and the designated income and receipts of the
  association pledged to the payment of the public securities.
         (b)  The board shall administer the accounts in accordance
  with this subchapter.
         Sec. 1809.357.  SOURCE OF PAYMENT. (a) Public securities
  issued under this subchapter are payable only from:
               (1)  the reimbursement premiums collected under
  Subchapter G; or
               (2)  any other amounts that the department is
  authorized to levy, charge, and collect on behalf of the fund.
         (b)  The public securities are obligations solely of the
  department and do not create a pledge, gift, or loan of the faith,
  credit, or taxing authority of this state.
         (c)  Each public security must:
               (1)  include a statement that the state is not
  obligated to pay any amount on the security and that the faith,
  credit, or taxing authority of this state are not pledged, given, or
  lent to those payments; and
               (2)  state on the security's face that the security:
                     (A)  is payable solely from the revenue pledged
  for that purpose; and
                     (B)  is not and may not constitute a legal or moral
  obligation of the state.
         Sec. 1809.358.  PAYMENT OF INTEREST. Interest on the public
  securities issued under this subchapter shall be paid from the
  reimbursement premiums collected under Subchapter G.
         Sec. 1809.359.  EXEMPTION FROM TAXATION. Public securities
  issued under this subchapter, any interest from those public
  securities, and all assets pledged to secure the payment of the
  public securities are free from taxation by the state or a political
  subdivision of this state.
         Sec. 1809.360.  AUTHORIZED INVESTMENTS. Public securities
  issued under this subchapter are authorized investments under
  Subchapter B, Chapter 424, and Subchapters C and D, Chapter 425.
         Sec. 1809.361.  STATE PLEDGE REGARDING PUBLIC SECURITY OWNER
  RIGHTS AND REMEDIES. (a) The state pledges to and agrees with the
  owners of public securities issued in accordance with this
  subchapter that the state will not limit or alter the rights vested
  in the department to fulfill the terms of agreements made with the
  owners or in any way impair the rights and remedies of those owners
  until the following obligations are fully discharged:
               (1)  the public securities;
               (2)  any bond premium;
               (3)  interest; and
               (4)  all costs and expenses related to an action or
  proceeding by or on behalf of the owners.
         (b)  The department may include the state's pledge and
  agreement under Subsection (a) in an agreement with the owners of
  the public securities.
         Sec. 1809.362.  PAYMENT ENFORCEABLE BY MANDAMUS. A writ of
  mandamus and any other legal or equitable remedy are available to a
  party in interest to require the department or another party to
  fulfill an agreement or perform a function or duty under:
               (1)  this subchapter;
               (2)  the Texas Constitution; or
               (3)  a public security resolution.
  [Sections 1809.363-1809.400 reserved for expansion]
  SUBCHAPTER I. ENFORCEMENT
         Sec. 1809.401.  SANCTIONS. An insurer that violates this
  chapter or a rule adopted under this chapter is subject to sanctions
  under Chapter 82.
         SECTION 2.  Subchapter D, Chapter 418, Government Code, is
  amended by adding Section 418.075 to read as follows:
         Sec. 418.075.  DISASTER PREPAREDNESS AND MITIGATION GRANT
  COUNCIL. (a)  In this section:
               (1)  "Council" means the disaster preparedness and
  mitigation grant council.
               (2)  "Covered event" has the meaning assigned by
  Section 1809.003, Insurance Code.
         (b)  The disaster preparedness and mitigation grant council
  is composed of:
               (1)  the following ex officio members:
                     (A)  the executive commissioner of the Health and
  Human Services Commission or that person's designee; and
                     (B)  the director of the division or that person's
  designee; and
               (2)  the following members appointed by the governor to
  serve a two-year term:
                     (A)  an engineer;
                     (B)  two representatives of law enforcement;
                     (C)  a public member;
                     (D)  a representative of insurers; and
                     (E)  two representatives of firefighters.
         (c)  The lieutenant governor shall designate two members of
  the senate and the speaker of the house of representatives shall
  designate two members of the house of representatives to advise the
  council.
         (d)  The governor shall designate the presiding officer of
  the council.
         (e)  A council member appointed under Subsection (b)(2) is
  not entitled to compensation, but is entitled to reimbursement for
  traveling expenses incurred in performing duties as a member of the
  council up to the limit provided by the General Appropriations Act.
         (f)  Appointments to the council shall be made without regard
  to the race, color, disability, sex, religion, age, or national
  origin of the appointees.
         (g)  The division may use funds received under Section
  1809.103, Insurance Code, to provide grant funding for local
  governments, state agencies, public and private educational
  institutions, and nonprofit organizations to support programs
  intended to:
               (1)  improve natural disaster preparedness;
               (2)  reduce potential losses from covered events;
               (3)  provide research into means to reduce those
  losses;
               (4)  educate or inform the public as to means to reduce
  losses from covered events;
               (5)  assist the public in determining the
  appropriateness of particular upgrades to structures or in the
  financing of those upgrades; or
               (6)  protect local infrastructure from potential
  damage from a covered event.
         (h)  The division may award money under Subsection (g) only
  with the express written prior approval of the council.  The council
  shall consult with the advisors appointed under Subsection (c)
  before approving a proposed grant.
         SECTION 3.  The commissioner of insurance shall appoint the
  advisory council established under Section 1809.054, Insurance
  Code, as added by this Act, not later than the 30th day after the
  effective date of this Act.
         SECTION 4.  The disaster preparedness and mitigation grant
  council established under Section 418.075, Government Code, as
  added by this Act, shall be established as provided by that section
  not later than the 60th day after the effective date of this Act.
         SECTION 5.  The commissioner of insurance shall adopt the
  initial contract forms required under Chapter 1809, Insurance Code,
  as added by this Act, not later than the 30th day after the
  effective date of this Act, and shall adopt the initial premium
  formula not later than the 60th day after the effective date of this
  Act.
         SECTION 6.  The Texas Department of Insurance shall enter
  into reimbursement contracts with insurers under Chapter 1809,
  Insurance Code, as added by this Act, not later than the 90th day
  after the effective date of this Act.
         SECTION 7.  (a) Except as provided by Subsection (b), an
  insurer is not required to comply with Chapter 1809, Insurance
  Code, until the 90th day after the effective date of this Act.
         (b)  An insurer shall pay the advance premium payment
  required under Section 1809.107, Insurance Code, as added by this
  Act, not later than the 60th day after the effective date of this
  Act.
         SECTION 8.  Not later than the 120th day after the effective
  date of this Act, the disaster preparedness and mitigation grant
  council established under Section 418.075, Government Code, as
  added by this Act, shall establish the grant program described by
  that section.
         SECTION 9.  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.