83R3188 TJS/AJA/PMO/MEW-F
 
  By: Hinojosa S.B. No. 1089
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the operation of the Texas Windstorm Insurance
  Association and to catastrophe preparedness in the seacoast
  territories of this state.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
  ARTICLE 1.  PAYMENT OF INSURED LOSSES OF THE TEXAS WINDSTORM
  INSURANCE ASSOCIATION; FUNDING THE CATASTROPHE RESERVE TRUST FUND
         SECTION 1.01.  (a)  Subchapter B-1, Chapter 2210, Insurance
  Code, is amended by adding Section 2210.076 to read as follows:
         Sec. 2210.076.  TERMINATION OF PUBLIC SECURITIES PROGRAM;
  EXPIRATION OF SUBCHAPTER. (a) Notwithstanding any other law, public
  securities described by this subchapter may not be issued on or
  after September 1, 2013.
         (b)  This subchapter expires September 1, 2027.
         (b)  Notwithstanding Section 2210.076, Insurance Code, as
  added by this section, Subchapter B-1, Chapter 2210, Insurance
  Code, is continued in effect on and after September 1, 2027, only to
  the extent necessary to avoid the impairment of a public security
  obligation under Chapter 2210, Insurance Code, if any, that exists
  on or after that date.
         SECTION 1.02.  (a)  Subchapter M, Chapter 2210, Insurance
  Code, is amended by adding Section 2210.621 to read as follows:
         Sec. 2210.621.  TERMINATION OF PUBLIC SECURITIES PROGRAM;
  EXPIRATION OF SUBCHAPTER. (a) Notwithstanding any other law, public
  securities described by this subchapter may not be issued on or
  after September 1, 2013.
         (b)  This subchapter expires September 1, 2027.
         (b)  Notwithstanding Section 2210.621, Insurance Code, as
  added by this section, Subchapter M, Chapter 2210, Insurance Code,
  is continued in effect on and after September 1, 2027, only to the
  extent necessary to avoid the impairment of a public security
  obligation under Chapter 2210, Insurance Code, if any, that exists
  on or after that date.
         SECTION 1.03.  Chapter 2210, Insurance Code, is amended by
  adding Subchapter B-2 to read as follows:
  SUBCHAPTER B-2. PAYMENT OF LOSSES
         Sec. 2210.081.  DEFINITION. In this subchapter, "insurer"
  means a 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
  includes a county mutual insurance company, a Lloyd's plan, and a
  reciprocal or interinsurance exchange but does not include an
  entity described by Section 2210.006(b).
         Sec. 2210.082.  PAYMENT OF EXCESS LOSSES; PAYMENT FROM
  RESERVES AND TRUST FUND. (a) If, on or after September 1, 2013, an
  occurrence or series of occurrences in a catastrophe area results
  in insured losses and operating expenses of the association in
  excess of premium and other revenue of the association, the excess
  losses and operating expenses shall be paid as provided by this
  subchapter.
         (b)  The association shall pay losses in excess of premium
  and other revenue of the association from available reserves of the
  association and available amounts in the catastrophe reserve trust
  fund.
         (c)  Losses not paid under Subsection (b) shall be paid from
  the proceeds of public securities issued in accordance with this
  subchapter and Subchapter M-1 and insurer assessments assessed in
  accordance with this subchapter after the occurrence or series of
  occurrences that results in the losses.
         Sec. 2210.083.  PAYMENT FROM CLASS A PUBLIC SECURITIES AND
  INSURER ASSESSMENT. (a) On or after the date of an occurrence or
  series of occurrences that results in insured losses, any losses
  the association determines cannot be paid from available reserves
  or available amounts in the catastrophe reserve trust fund as
  provided by Section 2210.082(b) shall be paid as provided by this
  section from:
               (1)  the proceeds of Class A public securities
  authorized to be issued in accordance with Subchapter M-1; and
               (2)  an assessment against all insurers that provide
  property insurance in this state in accordance with this section.
         (b)  Public securities issued as described by this section:
               (1)  shall be issued as necessary in a principal amount
  not to exceed $1 billion, whether for a single occurrence or a
  series of occurrences, and outstanding public securities may not
  exceed a principal amount of $1 billion at any one time, regardless
  of the calendar year or years in which outstanding public
  securities were issued;
               (2)  subject to the $1 billion maximum described by
  Subdivision (1), may be issued, in one or more issuances or
  tranches; and
               (3)  must be repaid in the manner and from the sources
  prescribed by Subchapter M-1 within a period not to exceed 10 years,
  and may be repaid sooner if the board of directors elects to do so
  and the commissioner approves.
         (c)  If public securities are issued as described by this
  section, the department shall assess each insurer that provides
  property insurance in this state in accordance with this section.
         (d)  The total amount of an assessment under this section
  must equal one-half of the principal amount of the public
  securities issued under this section, and each insurer's share of
  the assessment must be based on the insurer's proportionate share
  of the total extended coverage and other allied lines premium
  received by all insurers for property insurance in this state in the
  calendar year preceding the year in which the assessment is made.
         (e)  The proceeds of an assessment under this section shall
  be deposited in the catastrophe reserve trust fund.
         (f)  The commissioner shall adopt rules to implement the
  assessment of insurers under this section.
         Sec. 2210.084.  PAYMENT FROM CLASS B PUBLIC SECURITIES AND
  INSURER ASSESSMENT. (a) On or after the date of an occurrence or
  series of occurrences that results in insured losses, any losses
  the association determines cannot be paid in the manner provided by
  Sections 2210.082 and 2210.083 shall be paid as provided by this
  section from:
               (1)  the proceeds of Class B public securities
  authorized to be issued in accordance with Subchapter M-1; and
               (2)  an assessment against all insurers that provide
  property insurance in this state in accordance with this section.
         (b)  Public securities described by Subsection (a):
               (1)  shall be issued as necessary in a principal amount
  not to exceed $900 million, whether for a single occurrence or a
  series of occurrences, and outstanding public securities may not
  exceed a principal amount of $900 million at any one time,
  regardless of the calendar year or years in which outstanding
  public securities were issued;
               (2)  subject to the $900 million maximum described by
  Subdivision (1), may be issued, in one or more issuances or
  tranches; and
               (3)  must be repaid in the manner and from the sources
  prescribed by Subchapter M-1 within a period not to exceed 10 years,
  and may be repaid sooner if the board of directors elects to do so
  and the commissioner approves.
         (c)  If public securities are issued as described by this
  section, the department shall assess each insurer that provides
  property insurance in this state in accordance with this section.
         (d)  The total amount of an assessment under this section
  must be equal to the principal amount of the public securities
  issued under this section, and each insurer's share of the
  assessment must be based on the insurer's proportionate share of
  the total extended coverage and other allied lines premium received
  by all insurers for property insurance in this state in the calendar
  year preceding the year in which the assessment is made.
         (e)  The proceeds of an assessment under this section shall
  be deposited in the catastrophe reserve trust fund.
         (f)  The commissioner shall adopt rules to implement the
  assessment of insurers under this section.
         Sec. 2210.085.  PAYMENT FROM CLASS C PUBLIC SECURITIES. (a)
  On or after the date of an occurrence or series of occurrences that
  results in insured losses, any losses the association determines
  cannot be paid in the manner provided by Sections 2210.082,
  2210.083, and 2210.084 shall be paid as provided by this section
  from the proceeds of Class C public securities authorized to be
  issued in accordance with Subchapter M-1.
         (b)  Public securities described by Subsection (a):
               (1)  shall be issued as necessary in a principal amount
  not to exceed $2.75 billion, whether for a single occurrence or a
  series of occurrences, and outstanding public securities may not
  exceed a principal amount of $2.75 billion at any one time,
  regardless of the calendar year or years in which outstanding
  public securities were issued;
               (2)  subject to the $2.75 billion maximum described by
  Subdivision (1), may be issued, in one or more issuances or
  tranches; and
               (3)  must be repaid in the manner and from the sources
  prescribed by Subchapter M-1 within a period not to exceed 14 years,
  and may be repaid sooner if the board of directors elects to do so
  and the commissioner approves.
         Sec. 2210.086.  PAYMENT FROM CLASS D PUBLIC SECURITIES. (a)
  On or after the date of an occurrence or series of occurrences that
  results in insured losses, any losses the association determines
  cannot be paid in the manner provided by Sections 2210.082,
  2210.083, 2210.084, and 2210.085 shall be paid as provided by this
  section from the proceeds of Class D public securities authorized
  to be issued in accordance with Subchapter M-1.
         (b)  Public securities described by Subsection (a):
               (1)  shall be issued as necessary in a principal amount
  and with terms and maturities necessary to pay insured losses
  described by Subsection (a) as determined under Section 2210.629;
  and
               (2)  must be repaid in the manner and from the sources
  prescribed by Subchapter M-1.
         Sec. 2210.087.  AUTHORIZATION TO ENTER INTO FINANCING
  ARRANGEMENTS. The association may borrow from, or enter into other
  financing arrangements with, any market source, under which the
  market source makes interest-bearing loans or other financial
  instruments available to the association to enable the association
  to pay losses under this subchapter or to obtain public securities
  under this subchapter. For purposes of this section, "financial
  instruments" includes commercial paper.
         Sec. 2210.088.  REINSURANCE. (a) Before an occurrence or
  series of occurrences described by this subchapter, an insurer may
  purchase reinsurance to cover an assessment for which the insurer
  would otherwise be liable under this subchapter.
         (b)  An insurer that elects to purchase reinsurance must
  notify the board of directors of the election in the form and manner
  prescribed by the association. If an insurer does not elect to
  purchase reinsurance under this section, the insurer remains liable
  for any assessment imposed under this subchapter.
         SECTION 1.04.  Section 2210.451, Insurance Code, is amended
  to read as follows:
         Sec. 2210.451.  DEFINITIONS [DEFINITION]. In this
  subchapter:
               (1)  "Insurer" means a 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 includes a county mutual
  insurance company, a Lloyd's plan, and a reciprocal or
  interinsurance exchange but does not include an entity described by
  Section 2210.006(b).
               (2)  "Trust [, "trust] fund" means the catastrophe
  reserve trust fund.
         SECTION 1.05.  Sections 2210.452(a), (c), and (d), Insurance
  Code, are amended to read as follows:
         (a)  The commissioner shall adopt rules under which the
  association makes payments to the catastrophe reserve trust
  fund.  The trust fund may be used only to fund  the obligations of
  the trust fund under Subchapters [Subchapter] B-1 and B-2.
         (c)  Following [At the end of] each calendar year [or policy
  year], the association shall pay [use] the total net gain from
  operations of the association in that year, including all premium
  and other revenue of the association in excess of incurred losses,
  operating expenses, public security obligations, and public
  security administrative expenses, to [make payments to] the trust
  fund except as provided by this subsection. If at the end of the
  calendar year the available balance in the trust fund is greater
  than or equal to 1.5 percent of the association's direct exposure,
  as determined under Section 2210.456, the association for that year
  shall pay to the trust fund an amount equal to at least three-tenths
  of one percent of the association's total exposure, as determined
  under Section 2210.456, and may use any net gain remaining after
  that payment[,] to procure reinsurance[,] or to make additional
  payments to the trust fund [and to procure reinsurance].
         (d)  The commissioner by rule shall establish the procedure
  relating to the disbursement of money from the trust fund to
  policyholders in the event of an occurrence or series of
  occurrences within a catastrophe area that results in a
  disbursement under Subchapters [Subchapter] B-1 and B-2.
         SECTION 1.06.  Subchapter J, Chapter 2210, Insurance Code,
  is amended by adding Section 2210.456 to read as follows:
         Sec. 2210.456.  CONTINGENT ADDITIONAL FUNDING; PREMIUM
  SURCHARGE AND INSURER ASSESSMENT. (a) Not later than January 31 of
  each year, the association shall submit to the commissioner in a
  form and manner, and using a method or formula determined by the
  commissioner by rule, a statement that reports:
               (1)  the association's total exposure for the previous
  calendar year;
               (2)  the association's direct exposure for the previous
  calendar year; and
               (3)  the current balance in the trust fund available to
  pay any losses under Subchapter B-2.
         (b)  In a calendar year in which the commissioner determines
  based on information reported in the statement required by
  Subsection (a) that the available balance in the trust fund is less
  than 1.5 percent of the association's total exposure for the
  previous calendar year, or in which any class of public security
  issued under Subchapter M-1 remains outstanding in any amount, the
  department, in accordance with this section, shall:
               (1)  assess each insurer that provides property
  insurance in this state; and
               (2)  assess a premium surcharge on each policyholder of
  a policy that covers insured property in a first tier coastal
  county.
         (c)  The total amount of the insurer assessment under
  Subsection (b) in a calendar year must equal 0.15 percent of the
  association's direct exposure for the previous calendar year, as
  reported in the statement required by Subsection (a), and each
  insurer's assessment must be based on the insurer's proportionate
  share of the total extended coverage and other allied lines premium
  received by all insurers for property insurance in this state in the
  previous calendar year. An insurer may not recoup an assessment
  paid under this section through a premium surcharge or tax credit.
         (d)  The premium surcharge described by Subsection (b) must
  equal 3.9 percent of premium and shall be assessed on each
  policyholder of a policy that covers insured property that is
  located in a first tier coastal county, including an automobile
  principally garaged in a first tier coastal county. The premium
  surcharge shall be assessed on each Texas windstorm and hail
  insurance policy and each property and casualty insurance policy,
  including an automobile insurance policy, issued for an automobile
  or other property located in the first tier coastal county. The
  premium surcharge applies to:
               (1)  all policies written under the following lines of
  insurance:
                     (A)  fire and allied lines;
                     (B)  farm and ranch owners;
                     (C)  residential property insurance;
                     (D)  private passenger automobile liability and
  physical damage insurance; and
                     (E)  commercial automobile liability and physical
  damage insurance; and
               (2)  the property insurance portion of a commercial
  multiple peril insurance policy.
         (e)  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 by a policyholder to pay the
  surcharge constitutes failure to pay premium for purposes of policy
  cancellation.
         (f)  The proceeds of an insurer assessment or premium
  surcharge under this section shall be deposited in the catastrophe
  reserve trust fund.
         (g)  The commissioner shall adopt rules to implement the
  assessment of insurers and policyholders under this section.
         SECTION 1.07.  Chapter 2210, Insurance Code, is amended by
  adding Subchapter M-1 to read as follows:
  SUBCHAPTER M-1. PUBLIC SECURITIES PROGRAM
         Sec. 2210.625.  FINDINGS AND PURPOSE. The legislature finds
  that authorizing the issuance of public securities to raise funds
  to provide windstorm and hail insurance through the association is
  for the benefit of the public and in furtherance of a public
  purpose.
         Sec. 2210.626.  DEFINITIONS. In this subchapter:
               (1)  "Authority" means the Texas Public Finance
  Authority.
               (2)  "Board" means the board of directors of the
  authority.
               (3)  "Class A public securities" means public
  securities authorized to be issued as described by Section
  2210.083.
               (4)  "Class B public securities" means public
  securities authorized to be issued as described by Section
  2210.084.
               (5)  "Class B public security trust fund" means the
  dedicated trust fund established by the board and held by the Texas
  Treasury Safekeeping Trust Company into which premium surcharges
  collected under Section 2210.637 for the purpose of repaying Class
  B public securities are deposited.
               (6)  "Class C public securities" means public
  securities authorized to be issued as described by Section
  2210.085.
               (7)  "Class C public security trust fund" means the
  dedicated trust fund established by the board and held by the Texas
  Treasury Safekeeping Trust Company into which premium surcharges
  collected under Section 2210.638 for the purpose of repaying Class
  C public securities are deposited.
               (8)  "Class D public securities" means public
  securities authorized to be issued as described by Section
  2210.086.
               (9)  "Class D public security trust fund" means the
  dedicated trust fund established by the board and held by the Texas
  Treasury Safekeeping Trust Company into which money received from
  any source for the purpose of repaying Class D public securities is
  deposited.
               (10)  "Credit agreement" has the meaning assigned by
  Chapter 1371, Government Code.
               (11)  "Insurer" means a 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 includes a county mutual
  insurance company, a Lloyd's plan, and a reciprocal or
  interinsurance exchange but does not include an entity described by
  Section 2210.006(b).
               (12)  "Public security" means a debt instrument or
  other public security issued by the authority.
               (13)  "Public security administrative expenses" means
  expenses incurred to administer public securities issued under this
  subchapter, including fees for credit enhancement, paying agents,
  trustees, and attorneys, and for other professional services.
               (14)  "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.
               (15)  "Public security obligation revenue fund" means
  the dedicated trust fund established by the association and held by
  the Texas Treasury Safekeeping Trust Company outside the state
  treasury under this subchapter.
         Sec. 2210.627.  APPLICABILITY OF OTHER LAWS. (a) The board
  shall issue the public securities described by Section 2210.628 in
  accordance with and subject to the requirements of Chapter 1232,
  Government Code, other than Section 1232.108 of that chapter, and
  in accordance with and subject to 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.
         (b)  A purpose for which public securities are issued under
  this chapter constitutes an eligible project for purposes of
  Chapter 1371, Government Code.
         Sec. 2210.628.  ISSUANCE OF PUBLIC SECURITIES AUTHORIZED.
  (a) At the request of the association and with the approval of the
  commissioner, the authority shall issue Class A, Class B, Class C,
  or Class D public securities. The association shall submit to the
  commissioner a cost-benefit analysis of various financing methods
  and funding structures when requesting the issuance of public
  securities under this subsection.
         (b)  The association shall specify in the association's
  request to the board the maximum principal amount of the public
  securities and the maximum term of the public securities.
         (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;
               (3)  capitalize interest for the period determined
  necessary by the association, not to exceed two years; and
               (4)  provide the amount of debt service coverage for
  public securities determined by the association, in consultation
  with the authority, to be required for the issuance of marketable
  public securities.
         (d)  An increase in the principal amount made under
  Subsection (c) is not included for purposes of determining the
  total amount of an assessment under Section 2210.083 or 2210.084.
         Sec. 2210.629.  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 by the board on behalf
  of the association.
         Sec. 2210.630.  ADDITIONAL COVENANTS. The board may make
  additional covenants with respect to the public securities and the
  designated income and receipts of the association pledged to their
  payment, and provide for the flow of funds and the establishment,
  maintenance, and investment of funds and accounts with respect to
  the public securities, and the administration of those funds and
  accounts, as provided in the proceedings authorizing the public
  securities.
         Sec. 2210.631.  PUBLIC SECURITY PROCEEDS. The proceeds of
  public securities issued by the board under this subchapter may be
  deposited with the Texas Treasury Safekeeping Trust Company in
  accordance with procedures established by the comptroller. The
  comptroller shall account to the association for the deposited
  money separately from all other money.
         Sec. 2210.632.  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;
               (5)  pay capitalized interest and principal on the
  public securities for the period determined necessary by the
  association under Section 2210.628;
               (6)  pay private financial agreements entered into by
  the association as temporary sources of payment of losses and
  operating expenses of the association; and
               (7)  reimburse the association for any cost described
  by Subdivisions (1)-(6) paid by the association before issuance of
  the public securities.
         (b)  Any excess public security proceeds that remain after
  the purpose for which the public securities were issued is
  satisfied may be used to purchase or redeem outstanding public
  securities or pay public security administrative expenses. Any
  excess public security proceeds that remain after all outstanding
  public securities are purchased or redeemed and all public security
  administrative expenses are paid shall be transferred to the
  catastrophe reserve trust fund.
         Sec. 2210.633.  REPAYMENT OF ASSOCIATION'S PUBLIC SECURITY
  OBLIGATIONS. (a) The association shall provide for the payment of
  all public security obligations from available funds collected by
  the association 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
  2210.636, 2210.637, 2210.638, and 2210.639, as applicable.
         (b)  If any public securities issued under this subchapter
  are outstanding, the authority shall notify the association of the
  amount of the public security obligations and the estimated amount
  of public security administrative expenses, if any, each calendar
  year in a period sufficient, as determined by the association, to
  permit the association to determine the availability of funds and,
  if necessary, assess a premium surcharge under Section 2210.637 or
  2210.638, as applicable.
         (c)  The association shall deposit:
               (1)  all revenue collected under Section 2210.636 in
  the public security obligation revenue fund;
               (2)  all money collected from a premium surcharge
  assessed under Section 2210.637 in the Class B public security
  trust fund;
               (3)  all money collected from a premium surcharge
  assessed under Section 2210.638 in the Class C public security
  trust fund; and
               (4)  all money received from any source for the purpose
  of repaying Class D public securities under Section 2210.639 in the
  Class D public security trust fund.
         (d)  Money deposited in a fund under this section may be
  invested as permitted by general law. Money in a 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 in order to ensure
  timely payment of obligations and expenses. The board may establish
  funds and accounts with the comptroller that the board determines
  are necessary to administer and repay the public security
  obligations. If the association has not transferred amounts
  sufficient to pay the public security obligations to the board's
  designated interest and sinking fund in a timely manner, the board
  may direct the Texas Treasury Safekeeping Trust Company to transfer
  from the public security obligation revenue fund, or the Class B,
  Class C, or Class D public security trust fund, to the appropriate
  account the amount necessary to pay the public security obligation.
         (e)  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,
  assessments, premium surcharges, and amounts on deposit in the
  public security obligation revenue fund, and the Class B, Class C,
  and Class D public security trust fund, together with any public
  security reserve fund, as provided in the proceedings authorizing
  the public securities and related credit agreements.
         (f)  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 public security obligation
  trust fund or the Class B, Class C, or Class D public security trust
  fund to the extent provided in the proceedings authorizing the
  credit agreement.
         Sec. 2210.634.  PUBLIC SECURITY PAYMENTS. (a) Revenue
  received from a premium surcharge under Section 2210.637 or
  2210.638 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. 2210.635.  EXCESS REVENUE COLLECTIONS AND INVESTMENT
  EARNINGS. Revenue collected in any calendar year from a premium
  surcharge under Section 2210.637 or 2210.638 that exceeds the
  amount of the public security obligations and public security
  administrative expenses payable in that calendar 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 calendar year, offsetting the amount of the premium
  surcharge that would otherwise be required to be levied for that
  year under this subchapter;
               (2)  used to redeem or purchase outstanding public
  securities; or
               (3)  deposited in the catastrophe reserve trust fund.
         Sec. 2210.636.  PAYMENT OF CLASS A PUBLIC SECURITIES. The
  association shall pay Class A public securities issued as described
  by Section 2210.083 from net premium and other revenue.
         Sec. 2210.637.  PAYMENT OF CLASS B PUBLIC SECURITIES. (a)
  The association shall pay Class B public securities issued as
  described by Section 2210.084 from:
               (1)  net premium and other revenue; and
               (2)  a first tier coastal county premium surcharge
  collected in accordance with this section.
         (b)  On approval by the commissioner, the association and
  each insurer that provides insurance in a first tier coastal county
  shall assess, as provided by this section, a premium surcharge to
  each policyholder of a policy described by Subsection (c) that is in
  effect on or after the 180th day after the date the commissioner
  issues notice of the approval of the public securities. The premium
  surcharge must be set in an amount sufficient to pay, for the
  duration of the issued public securities, all debt service not
  already covered by available funds and all related expenses on the
  public securities.
         (c)  The premium surcharge under this section shall be
  assessed on each policyholder of a policy that covers insured
  property that is located in a first tier coastal county, including
  an automobile principally garaged in a first tier coastal
  county. The premium surcharge shall be assessed on each Texas
  windstorm and hail insurance policy and each property and casualty
  insurance policy, including an automobile insurance policy, issued
  for an automobile or other property located in the first tier
  coastal county. The premium surcharge applies to:
               (1)  all policies written under the following lines of
  insurance:
                     (A)  fire and allied lines;
                     (B)  farm and ranch owners;
                     (C)  residential property insurance;
                     (D)  private passenger automobile liability and
  physical damage insurance; and
                     (E)  commercial automobile liability and physical
  damage insurance; and
               (2)  the property insurance portion of a commercial
  multiple peril insurance policy.
         (d)  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 by a policyholder to pay the
  surcharge constitutes failure to pay premium for purposes of policy
  cancellation.
         Sec. 2210.638.  PAYMENT OF CLASS C PUBLIC SECURITIES. (a)
  The association shall pay Class C public securities issued as
  described by Section 2210.085 from:
               (1)  net premium and other revenue; and
               (2)  a statewide premium surcharge collected in
  accordance with this section.
         (b)  On approval by the commissioner, the association and
  each insurer that provides insurance in this state shall assess, as
  provided by this section, a premium surcharge to each policyholder
  of a policy described by Subsection (c) that is in effect on or
  after the 180th day after the date the commissioner issues notice of
  the approval of the public securities. The premium surcharge must
  be set in an amount sufficient to pay, for the duration of the
  issued public securities, all debt service not already covered by
  available funds and all related expenses on the public securities.
         (c)  The premium surcharge under this section shall be
  assessed on each policyholder of a policy that covers insured
  property that is located in this state, including an automobile
  registered in this state. The premium surcharge shall be assessed
  on each Texas windstorm and hail insurance policy and each property
  and casualty insurance policy, including an automobile insurance
  policy, issued for an automobile or other property located in this
  state. The premium surcharge applies to:
               (1)  all policies written under the following lines of
  insurance:
                     (A)  fire and allied lines;
                     (B)  farm and ranch owners;
                     (C)  residential property insurance;
                     (D)  private passenger automobile liability and
  physical damage insurance; and
                     (E)  commercial automobile liability and physical
  damage insurance; and
               (2)  the property insurance portion of a commercial
  multiple peril insurance policy.
         (d)  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 by a policyholder to pay the
  surcharge constitutes failure to pay premium for purposes of policy
  cancellation.
         Sec. 2210.639.  PAYMENT OF CLASS D PUBLIC SECURITIES. (a)
  The association shall pay Class D public securities issued as
  described by Section 2210.086 from:
               (1)  net premium and other revenue; and
               (2)  money received from any source for the purpose of
  repaying Class D public securities.
         (b)  The association may accept for the use and benefit of
  the Class D public security trust fund any donation, contribution,
  gift, grant, or bequest of money or securities from any source.
         Sec. 2210.640.  AUTHORIZATION TO ENTER INTO FINANCING
  ARRANGEMENTS. The association may enter into financing
  arrangements as described by Section 2210.087 as necessary to
  obtain public securities issued under this subchapter.
         Sec. 2210.641.  REFINANCING PUBLIC SECURITIES. The
  association may request the board to refinance any public
  securities issued under this subchapter, whether Class A, Class B,
  Class C, or Class D public securities, with public securities
  payable from the same sources as the original public securities.
  Class A, Class B, Class C, or Class D public securities may be
  issued on a parity or subordinate lien basis with other Class A,
  Class B, Class C, or Class D public securities, respectively.
         Sec. 2210.642.  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 subchapter 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. 2210.643.  STATE NOT TO IMPAIR PUBLIC SECURITY
  OBLIGATIONS. (a) The state pledges for the benefit and protection
  of financing parties, the board, and the association that the
  state will not take or permit any action that would:
               (1)  impair the collection of premium surcharges or the
  deposit of those funds into the Class B or Class C public security
  trust fund;
               (2)  reduce, alter, or impair the premium surcharges to
  be imposed, collected, and remitted to financing parties until the
  principal, interest, and premium, and any other charges incurred
  and contracts to be performed in connection with the related public
  securities, have been paid and performed in full; or
               (3)  in any way impair the rights and remedies of the
  public security owners until the public securities are fully
  discharged.
         (b)  A party issuing public securities under this subchapter
  may include the pledge described by Subsection (a) in any
  documentation relating to those securities.
         Sec. 2210.644.  ENFORCEMENT BY MANDAMUS. A writ of mandamus
  and any other legal and equitable remedies are available to a party
  in 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 public security resolution or order authorizing
  public securities to be issued under this subchapter.
         Sec. 2210.645.  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. 2210.646.  NO PERSONAL LIABILITY. The members of the
  association, members of the association board of directors,
  association employees, the board, the employees of the authority,
  the commissioner, and department employees are not personally
  liable as a result of exercising the rights and responsibilities
  granted under this subchapter.
         Sec. 2210.647.  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.
  ARTICLE 2.  ASSOCIATION OPERATIONS
         SECTION 2.01.  Section 2210.0081, Insurance Code, is amended
  to read as follows:
         Sec. 2210.0081.  CERTAIN ACTIONS BROUGHT AGAINST
  ASSOCIATION BY COMMISSIONER.  (a)  In an action brought by the
  commissioner against the association under Chapter 441:
               (1)  the association's inability to satisfy obligations
  under Subchapters [Subchapter] M and M-1 related to the issuance of
  public securities under this chapter constitutes a condition that
  makes the association's continuation in business hazardous to the
  public or to the association's policyholders for the purposes of
  Section 441.052;
               (2)  a conservator shall complete the conservator's
  duties as required by Chapter 441 not later than six months after
  the date of the appointment [the time for the association to comply
  with the requirements of supervision or for the conservator to
  complete the conservator's duties, as applicable, is limited to
  three years from the date the commissioner commences the action
  against the association]; and
               (3)  unless the commissioner takes further action
  against the association under Chapter 441, as a condition of
  release from supervision, the association must demonstrate to the
  satisfaction of the commissioner that the association:
                     (A)  is able to satisfy obligations under
  Subchapters [Subchapter] M and M-1 related to the issuance of
  public securities under this chapter; and
                     (B)  has met the criteria established under
  Subsection (b).
         (b)  The commissioner by rule shall establish specific
  criteria for the release of the association from conservatorship.
         (c)  The conservator shall provide a written report that
  states the release status of the association and explains in detail
  all efforts undertaken to meet the criteria established under
  Subsection (b) to:
               (1)  the association on a monthly basis; and
               (2)  the legislature on a quarterly basis.
         (d)  After notice and hearing, the commissioner may extend
  the conservatorship for one additional period not to exceed six
  months.
         SECTION 2.02.  Section 2210.102, Insurance Code, is amended
  to read as follows:
         Sec. 2210.102.  COMPOSITION. (a) The board of directors is
  composed of 11 [nine] members appointed by the governor
  [commissioner] in accordance with this section.
         (b)  Three [Four] members must be representatives of the
  insurance industry who actively write and renew windstorm and hail
  insurance in the seacoast territory.
         (c)  Six [Four] members must, as of the date of the
  appointment, reside in the first tier coastal counties.  Of the six
  members appointed under this subsection:
               (1)  two [At least one of the members appointed under
  this subsection] must be [a] property and casualty agents [agent]
  who are [is] licensed under this code and are [is] not [a] captive
  agents;
               (2)  one must be a representative of the construction
  industry;
               (3)  one must be a coastal engineer; and
               (4)  two must be policyholders of the association and
  not agents [agent].
         (d)  One member must be a representative of an area of this
  state that is not located in the seacoast territory with
  demonstrated expertise in insurance and actuarial principles.
         (d-1)  One member must be a representative of the financial
  industry.
         (e)  All members must have demonstrated experience in
  insurance, general business, [or] actuarial principles, finance,
  engineering, or construction sufficient to make the success of the
  association probable.
         (f)  Insurers who are members of the association shall
  nominate, from among those members, persons to fill any vacancy in
  the three [four] board of director seats reserved for
  representatives of the insurance industry.  The board of directors
  shall solicit nominations from the members and submit the
  nominations to the governor [commissioner].  The nominee slate
  submitted to the governor [commissioner] under this subsection must
  include at least three more names than the number of vacancies.  The
  governor [commissioner] shall appoint replacement insurance
  industry representatives from the nominee slate.
         (g)  The governor [commissioner] shall appoint three persons
  [one person] to serve as [a] nonvoting members [member] of the
  board, each of whom must, as of the date of the appointment, be a
  public official of a first tier coastal county, with each of the
  following regions represented by one nonvoting member:
               (1)  the region consisting of Cameron, Kenedy, Kleberg,
  and Willacy Counties;
               (2)  the region consisting of Aransas, Calhoun, Nueces,
  Refugio, and San Patricio Counties; and
               (3)  the region consisting of Brazoria, Chambers,
  Galveston, Jefferson, and Matagorda Counties [to advise the board
  regarding issues relating to the inspection process.   The
  commissioner may give preference in an appointment under this
  subsection to a person who is a qualified inspector under Section
  2210.254.   The nonvoting member appointed under this section must:
               [(1)     be an engineer licensed by, and in good standing
  with, the Texas Board of Professional Engineers;
               [(2)  reside in a first tier coastal county; and
               [(3)     be knowledgeable of, and have professional
  expertise in, wind-related design and construction practices in
  coastal areas that are subject to high winds and hurricanes].
         (h)  The persons appointed under Subsection (c) must be from
  different counties with each of the regions listed in Subsection
  (g) represented by at least one person.
         SECTION 2.03.  Section 2210.202, Insurance Code, is amended
  by adding Subsection (c) to read as follows:
         (c)  The association shall develop and implement an
  automated initial application and renewal process that allows for
  the acceptance of an application for initial or renewal coverage,
  and payment of premiums, from a property and casualty agent or a
  person insured under this chapter.
         SECTION 2.04.  Subchapter E, Chapter 2210, Insurance Code,
  is amended by adding Section 2210.2031 to read as follows:
         Sec. 2210.2031.  PREMIUM SURCHARGE TO REINSTATE PREVIOUS
  COVERAGE. An insured who without cause cancels or allows to lapse
  insurance coverage issued by the association may subsequently
  obtain coverage from the association for the previously insured
  property only by paying a premium surcharge of 20 percent.
         SECTION 2.05.  Section 2210.363(a), Insurance Code, is
  amended to read as follows:
         (a)  The association shall [may] offer a person insured under
  this chapter an actuarially justified premium discount on a policy
  issued by the association, or an actuarially justified credit
  against a surcharge assessed against the person, other than a
  surcharge assessed under Subchapters [Subchapter] M and M-1, if:
               (1)  the construction, alteration, remodeling,
  enlargement, or repair of, or an addition to, insurable property:
                     (A)  exceeds applicable building code standards
  set forth in the plan of operation; or
                     (B)  includes:
                           (i)  roof strapping designed and
  manufactured to withstand a wind load as required by the plan of
  operation;
                           (ii)  window and door coverings designed and
  manufactured to withstand a wind load as required by the plan of
  operation;
                           (iii)  a roof designed and constructed to
  withstand a wind load as required by the plan of operation; or
                           (iv)  a secondary roof seal; or
               (2)  the person elects to purchase a binding
  arbitration endorsement under Section 2210.554.
         SECTION 2.06.  Section 2210.0081, Insurance Code, as amended
  by this article, applies to an action by the commissioner against
  the association under Chapter 441, Insurance Code, brought before,
  on, or after the effective date of this Act. For a conservatorship
  pending on the effective date of this Act, the conservator shall
  complete the conservator's duties as required by Chapter 441,
  Insurance Code, not later than six months after the effective date
  of this Act.
         SECTION 2.07.  (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 article, is abolished effective December 31, 2013.
         (b)  The governor 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 article, not
  later than December 31, 2013.
         (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 December 31, 2013.  Such a person is
  eligible for appointment by the governor to the new board of
  directors of the Texas Windstorm Insurance Association, subject to
  the requirements of Section 2210.102, Insurance Code, as amended by
  this article.
         SECTION 2.08.  Section 2210.2031, Insurance Code, as added
  by this article, applies only to a reinstatement of an insurance
  policy that is canceled or lapses on or after the effective date of
  this Act. A reinstatement of a policy that is canceled or lapses
  before the effective date of this Act is governed by the law as it
  existed immediately before the effective date of this Act, and that
  law is continued in effect for that purpose.
         SECTION 2.09.  The change in law made by this article to
  Section 2210.363(a), Insurance Code, applies only to an insurance
  policy that is delivered, issued for delivery, or renewed on or
  after January 1, 2014. A policy delivered, issued for delivery, or
  renewed before January 1, 2014, is governed by the law as it existed
  immediately before the effective date of this Act, and that law is
  continued in effect for that purpose.
  ARTICLE 3.  MARKET INCENTIVES
         SECTION 3.01.  Chapter 2210, Insurance Code, is amended by
  adding Subchapter J-1 to read as follows:
  SUBCHAPTER J-1. MARKET INCENTIVES
         Sec. 2210.477.  ASSUMED REINSURANCE PROGRAM. (a) The
  association may establish a reinsurance program under which the
  association, on a quota share or excess of loss basis or otherwise,
  assumes reinsurance ceded by insurers included on the list
  maintained under Section 2210.476 for a portion of the losses
  incurred by the ceding insurers by writing windstorm and hail
  insurance coverage for property in the seacoast territory.
         (b)  A program established under this section:
               (1)  must:
                     (A)  be administered under the plan of operation
  and operate in a manner consistent with sound insurance practices;
                     (B)  provide for efficient, economical, fair, and
  nondiscriminatory administration of the program; and
                     (C)  allow reasonable flexibility to accommodate
  insurers in situations of an unusual nature or in which undue
  hardship may result; and
               (2)  may not in any way impair, override, supersede, or
  constrain the public purpose of the association.
         (c)  The plan of operation may provide for various levels of
  assumption of risk and retention in a program established under
  this section.
         (d)  A program established under this section must provide
  reimbursement to the insurer in the manner provided by the
  reinsurance contract for covered events in exchange for the
  reinsurance premium paid to the association as specified by the
  plan of operation. Each reinsurance contract must contain:
               (1)  a promise to pay the ceding insurer for the
  insurer's losses from each covered event in excess of the insurer's
  retention, if any, required by the plan of operation;
               (2)  a requirement that amounts due to the insurer not
  be reduced by reinsurance paid or payable to the insurer from other
  sources;
               (3)  a requirement that all contracts covering a
  particular contract year may not exceed the association's actual
  capacity to pay claims, up to a limit defined in the plan of
  operation;
               (4)  a requirement of interim quarterly reporting to
  the association from each insurer of losses from each covered
  event; and
               (5)  a requirement that, if the insurer becomes
  insolvent, the association shall pay the net amount owed to the
  insurer directly to the conservator, receiver, or other statutory
  successor for the benefit of the insurer's policyholders in this
  state.
         (e)  A premium paid by an insurer to the association under a
  reinsurance contract shall be treated as a premium paid by the
  insurer for approved reinsurance for all accounting and regulatory
  purposes.
         Sec. 2210.478.  INFORMATION SHARING. (a) The association
  shall:
               (1)  maintain an electronic database composed of
  information designed to assist an insurer in participating in or
  entering the voluntary windstorm and hail insurance market in the
  seacoast territory; and
               (2)  provide access to the database to insurers that
  engage in the business of property insurance in this state.
         (b)  The database may include information on the
  association's business that may be disclosed under Chapter 552,
  Government Code, or other information as determined by the board,
  that relates to:
               (1)  underwriting;
               (2)  the issuance of policies;
               (3)  loss control services;
               (4)  the investigation or reporting of actual or
  potential fraud, misrepresentation, or criminal activity;
               (5)  ratemaking;
               (6)  reinsurance or excess loss insurance;
               (7)  the administration of consumer disputes and
  inquiries; and
               (8)  claims administration, adjustment, and
  management.
         (c)  The database must be designed to protect:
               (1)  private information about the association's
  policyholders or from which a policyholder is identifiable;
               (2)  information considered to be confidential by
  constitutional or statutory law or by judicial decision; and
               (3)  information relating to litigation of a civil or
  criminal nature to which the association is or may be a party or to
  which an officer or employee of the association, as a consequence of
  the person's office or employment, is or may be a party.
         Sec. 2210.479.  STUDY OF MARKET INCENTIVES; REPORTING. (a)
  The department shall conduct a study of market incentives to
  promote participation in the voluntary windstorm and hail insurance
  market in the seacoast territory. The study must address as
  possible incentives:
               (1)  the mandatory or voluntary issuance of windstorm
  and hail insurance in conjunction with the issuance of a homeowners
  policy in the seacoast territory; and
               (2)  the establishment of an assigned risk pool.
         (b)  The department shall deliver to the legislature a
  biennial report on the results of the study.
         Sec. 2210.480.  WINDSTORM AND HAIL INSURANCE ISSUED BY
  PRIVATE MARKET: CLAIMS SETTLEMENT AND DISPUTE RESOLUTION. (a)
  Except as otherwise provided by this section, windstorm and hail
  insurance coverage voluntarily issued by an insurer that is
  comparable to Texas windstorm and hail insurance issued by the
  association as determined by the commissioner by rule and that is
  issued for a structure located in the seacoast territory or
  corporeal movable property contained in the structure is subject to
  the claims settlement and dispute resolution provisions of
  Subchapter L-1 as if the insurer were the association and the
  windstorm and hail insurance coverage issued by the insurer were an
  association policy.
         (b)  The claims settlement and dispute resolution provisions
  applicable under this section apply only with respect to a claim
  that is a request for payment under the windstorm and hail insurance
  coverage issued by the insurer.
         (c)  Sections 2210.572(a) and (b) apply to an insurer that
  issues windstorm and hail insurance coverage to which this section
  applies only with respect to a claim described by Subsection (b).
  Section 2210.572(c) limits the insurer's liability for damages
  under Chapter 17, Business & Commerce Code, or any other provision
  of law providing for additional damages, punitive damages, or a
  penalty only to the extent the damages arise in connection with
  windstorm and hail insurance coverage to which this section
  applies.
         (d)  An insurer shall use the guidelines published under
  Section 2210.578 to settle claims under windstorm and hail
  insurance coverage to which this section applies.
         (e)  This section does not affect the terms for the
  submission, settlement, payment, or dispute resolution of any claim
  made under any other type of coverage provided in the same policy as
  the windstorm and hail insurance coverage.
         Sec. 2210.481.  WINDSTORM AND HAIL INSURANCE ISSUED BY
  PRIVATE MARKET: REQUIRED POLICY PROVISIONS. (a) A policy issued by
  an insurer that includes windstorm and hail insurance coverage
  described by Section 2210.480(a) must include provisions that
  comply with the requirements of Section 2210.205 with respect to
  that coverage. The time period for bringing a claim under the
  policy provision required by Section 2210.205(a)(1) is subject to
  extension by the commissioner in accordance with Section
  2210.205(b).
         (b)  To the extent the claims settlement and dispute
  resolution procedures prescribed by Subchapter L-1 are dependent on
  terms included in an association policy, a policy that provides
  windstorm and hail insurance coverage that is subject to this
  section must include comparable provisions applicable to the
  coverage as prescribed by the commissioner by rule.
         Sec. 2210.482.  WINDSTORM AND HAIL INSURANCE ISSUED BY
  PRIVATE MARKET: ACCESSIBILITY OF OMBUDSMAN PROGRAM.  (a)  A person
  insured under windstorm and hail insurance coverage described by
  Section 2210.480(a) is entitled to assistance and information from
  the ombudsman program established under Section 2210.582 to the
  same extent as a person insured by the association under this
  chapter.
         (b)  An insurer that issues windstorm and hail insurance
  coverage described by Section 2210.480(a) shall notify the insured,
  in the manner prescribed by the commissioner by rule, concerning
  the operation of the ombudsman program.
         SECTION 3.02.  Section 2210.009, Insurance Code, is
  transferred to Subchapter J-1, Chapter 2210, Insurance Code, as
  added by this article, redesignated as Section 2210.476, Insurance
  Code, and amended to read as follows:
         Sec. 2210.476 [2210.009].  LIST OF PRIVATE INSURERS;
  INCENTIVE PLAN. (a) The department shall maintain a list of all
  insurers that engage in the business of property and casualty
  insurance in the voluntary market in the seacoast territory.
         (b)  The department shall develop incentive programs that
  include the market incentives described by this subchapter [in the
  manner described by Section 2210.053(b)] to encourage authorized
  insurers to write windstorm and hail insurance on a voluntary basis
  to cover property located in the seacoast territory and to minimize
  the use of the association as a means to obtain that insurance.
         SECTION 3.03.  Section 2210.053(b), Insurance Code, is
  amended to read as follows:
         (b)  The department may develop programs to improve the
  efficient operation of the association, including a program for
  approving policy forms under Section 2301.010 [and a program
  designed to create incentives for insurers to write windstorm and
  hail insurance voluntarily to cover property located in a
  catastrophe area, especially property located on the barrier
  islands of this state].
         SECTION 3.04.  Sections 2210.480, 2210.481, and 2210.482,
  Insurance Code, as added by this article, apply only to windstorm
  and hail insurance coverage under an insurance policy delivered,
  issued for delivery, or renewed on or after January 1, 2014.
  Coverage under a policy delivered, issued for delivery, or renewed
  before that date is governed by the law as it existed immediately
  before the effective date of this Act, and that law is continued in
  effect for that purpose.
  ARTICLE 4.  BUILDING STANDARDS
         SECTION 4.01.  Chapter 233, Local Government Code, is
  amended by adding Subchapter G to read as follows:
  SUBCHAPTER G. RESIDENTIAL BUILDING CODE STANDARDS APPLICABLE TO
  UNINCORPORATED AREAS OF COASTAL COUNTIES
         Sec. 233.201.  DEFINITIONS. In this subchapter:
               (1)  "First tier coastal county" has the meaning
  assigned by Section 2210.003, Insurance Code.
               (2)  "Residential" means a single-family house or a
  duplex.
               (3)  "Windstorm certificate" means the certificate of
  compliance for eligibility for windstorm insurance coverage issued
  by the Texas Department of Insurance under Chapter 2210, Insurance
  Code.
         Sec. 233.202.  APPLICABILITY. This subchapter applies only
  to a first tier coastal county.
         Sec. 233.203.  WINDSTORM BUILDING CODE STANDARDS
  APPLICABLE. (a) Residential construction, including an
  alteration, remodel, enlargement, or repair involving one or more
  structural building components, in the unincorporated area of a
  county shall conform to the residential building code standards
  required to obtain a windstorm certificate.
         (b)  Standards required under this subchapter apply only to
  residential construction in the unincorporated area of a county
  that begins after September 1, 2013.
         (c)  If a municipality located in a county to which this
  subchapter applies has adopted a residential building code that
  conforms to the standards required to obtain a windstorm
  certificate and that applies in the municipality's
  extraterritorial jurisdiction, the requirements of this subchapter
  have no effect in the municipality's extraterritorial
  jurisdiction.
         (d)  This subchapter may not be construed to:
               (1)  require prior approval by the county before the
  beginning of residential construction; or
               (2)  authorize the commissioners court of a county to
  adopt or enforce zoning regulations.
         (e)  To the extent of a conflict between this subchapter and
  Subchapter F, this subchapter controls.
         Sec. 233.204.  CERTIFICATE OF OCCUPANCY. A county shall
  issue a certificate of occupancy for a residential structure
  located in the unincorporated area of the county if the owner of the
  structure presents a copy of a windstorm certificate for the
  structure with the application for the certificate of occupancy.
         Sec. 233.205.  RULES; FORMS; FEES. (a) The commissioners
  court of a county shall by order adopt the rules and forms necessary
  to implement this section.
         (b)  The commissioners court may by order adopt a reasonable
  fee for the issuance of a certificate of occupancy under this
  section.
         Sec. 233.206.  UTILITY CONNECTION. (a)  An entity described
  by Subsection (b) may not serve or connect a residential structure
  located in the unincorporated area of a county and for which
  construction began after September 1, 2013, with water, sewer,
  electricity, gas, or other utility service unless the county has
  issued the structure a certificate of occupancy under this
  subchapter.
         (b)  This section applies to any entity that provides water,
  sewer, electricity, gas, or other utility service, including:
               (1)  a municipality or county;
               (2)  a municipally owned or operated utility;
               (3)  a public utility;
               (4)  a water supply or sewer service corporation
  operating under Chapter 67, Water Code; or
               (5)  a special district or authority created under
  state law.
         SECTION 4.02.  Chapter 250, Local Government Code, is
  amended by adding Section 250.007 to read as follows:
         Sec. 250.007.  MANDATORY INSPECTION OF RESIDENTIAL
  CONSTRUCTION IN SEACOAST TERRITORY. (a)  In this section,
  "seacoast territory" has the meaning assigned by Section 2210.003,
  Insurance Code.
         (b)  This section applies to any residential construction,
  including an alteration, remodel, enlargement, or repair,
  involving one or more structural building components and located in
  the seacoast territory. This section applies without regard to
  whether an application for insurance for the property under Chapter
  2210, Insurance Code, has been or will be made.
         (c)  A municipality or county may not issue a certificate of
  occupancy or completion for residential construction unless:
               (1)  the roof of the construction has been designed for
  compliance with uniform static wind pressure requirements of 140
  miles per hour, for construction seaward of the intercoastal
  waterway, or 130 miles per hour, for construction inland of the
  intercoastal waterway; and
               (2)  the construction has been inspected and certified
  by the Texas Department of Insurance under Subchapter F, Chapter
  32, Insurance Code.
         SECTION 4.03.  Chapter 32, Insurance Code, is amended by
  adding Subchapter F to read as follows:
  SUBCHAPTER F. RESIDENTIAL CONSTRUCTION INSPECTIONS
         Sec. 32.201.  DEFINITION. In this subchapter, "seacoast
  territory" has the meaning assigned by Section 2210.003.
         Sec. 32.202.  APPLICABILITY. This subchapter applies to any
  residential construction to which Section 250.007, Local
  Government Code, applies.
         Sec. 32.203.  MANDATORY WIND RESISTANT STANDARDS. (a) The
  department shall conduct inspections for compliance with the
  standards established under Section 250.007, Local Government
  Code.
         (b)  The department shall issue a certificate of compliance
  if the construction meets the standards established under Section
  250.007, Local Government Code.
         Sec. 32.204.  WINDSTORM INSURANCE APPLICATION NOT REQUIRED.
  The department shall inspect property for compliance with standards
  established under Chapter 2210 without regard to whether an
  application has been or will be made under that chapter for
  insurance for the property.
         SECTION 4.04.  Section 250.007, Local Government Code, and
  Subchapter F, Chapter 32, Insurance Code, as added by this article,
  apply only with respect to residential construction commenced on or
  after the effective date of this Act. Residential construction
  commenced before the effective date of this Act is governed by the
  law applicable to the construction immediately before the effective
  date of this Act. For the purposes of this section, construction
  commenced before the effective date of this Act if the application
  for a building permit under which the construction commences was
  submitted before the effective date of this Act.
  ARTICLE 5.  EFFECTIVE DATE
         SECTION 5.01.  This Act takes effect September 1, 2013.