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  S.B. No. 900
 
 
 
 
AN ACT
  relating to the operation of the Texas Windstorm Insurance
  Association.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 2210.003, Insurance Code, is amended by
  amending Subdivision (1) and adding Subdivision (1-a) to read as
  follows:
               (1)  "Administrator" means an entity contractually
  retained to manage the association and administer the plan of
  operation under Section 2210.062.
               (1-a)  "Association" means the Texas Windstorm
  Insurance Association.
         SECTION 2.  Section 2210.014, Insurance Code, is amended by
  amending Subsection (b) and adding Subsection (c) to read as
  follows:
         (b)  Chapter 542 does not apply to [the processing and
  settlement of claims by] the association or to an agent or
  representative of the association.
         (c)  An administrator contracted under Section 2210.062, if
  applicable, is an agent of the association for purposes of managing
  the association and administering the plan of operation under this
  chapter.
         SECTION 3.  Subchapter A, Chapter 2210, Insurance Code, is
  amended by adding Section 2210.015 to read as follows:
         Sec. 2210.015.  STUDY OF MARKET INCENTIVES; BIENNIAL
  REPORTING.  (a)  Each biennium, the department shall conduct a
  study of market incentives to promote participation in the
  voluntary windstorm and hail insurance market in the seacoast
  territory of this state.  The study must address as possible
  incentives the mandatory or voluntary issuance of windstorm and
  hail insurance in conjunction with the issuance of a homeowners
  policy in the seacoast territory.
         (b)  The department shall include the results of the study
  conducted under this section in the report submitted under Section
  32.022.
         SECTION 4.  Subchapter B, Chapter 2210, Insurance Code, is
  amended by adding Section 2210.062 to read as follows:
         Sec. 2210.062.  ADMINISTRATION BY CONTRACTED ADMINISTRATOR
  AUTHORIZED. (a)  Notwithstanding any other law, if determined by
  the commissioner to be in the best interest of the policyholders and
  the public, the commissioner may contract with an administrator to
  manage the association and administer the plan of operation.
         (b)  The commissioner shall adopt rules as necessary to
  implement this section if the commissioner determines management of
  the association and administration of the plan of operation by an
  administrator is in the best interest of the policyholders and the
  public.
         (c)  The administrator must hold either a managing general
  agent license issued under Chapter 4053 or a third-party
  administrator certificate of authority issued under Chapter 4151.
         SECTION 5.  Subchapter B-1, Chapter 2210, Insurance Code, is
  amended by amending Section 2210.071 and adding Section 2210.0715
  to read as follows:
         Sec. 2210.071.  PAYMENT OF EXCESS LOSSES[; PAYMENT FROM
  RESERVES AND TRUST FUND].  [(a)]  If, in a catastrophe year, an
  occurrence or series of occurrences in a catastrophe area results
  in insured losses and operating expenses of the association in
  excess of premium and other revenue of the association, the excess
  losses and operating expenses shall be paid as provided by this
  subchapter.
         Sec. 2210.0715.  PAYMENT FROM RESERVES AND TRUST FUND.  
  (a)  [(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.
         (b)  Proceeds of Class 1 public securities issued before the
  date of any occurrence or series of occurrences that results in
  insured losses may not be included in available reserves for
  purposes of this section.
         [(c)     Losses not paid under Subsection (b) shall be paid from
  the proceeds from public securities issued in accordance with this
  subchapter and Subchapter M and, notwithstanding Subsection (a),
  may be paid from the proceeds of public securities issued under
  Section 2210.072(a) before an occurrence or series of occurrences
  that results in insured losses.]
         SECTION 6.  Section 2210.072, Insurance Code, is amended to
  read as follows:
         Sec. 2210.072.  PAYMENT FROM CLASS 1 PUBLIC SECURITIES;
  FINANCIAL INSTRUMENTS. (a)  Losses not paid under Section
  2210.0715 [Section 2210.071(b)] shall be paid as provided by this
  section from the proceeds from Class 1 public securities
  [authorized to be] issued in accordance with Subchapter M before,
  on, or after the date of any occurrence or series of occurrences
  that results in insured losses. Public securities described by
  [issued under] this section must be paid [repaid] within a period
  not to exceed 14 years, and may be paid [repaid] sooner if the board
  of directors elects to do so and the commissioner approves.
         (b)  Public securities described by Subsection (a) that are
  issued before an occurrence or series of occurrences that results
  in incurred losses:
               (1)  may be issued on the request of the board of
  directors with the approval of the commissioner; and
               (2)  may not, in the aggregate, exceed $500 million [$1
  billion] at any one time, regardless of the calendar year or years
  in which the outstanding public securities were issued.
         (b-1)  Public securities described by Subsection (a):
               (1)  shall be issued as necessary in a principal amount
  not to exceed $500 million [$1 billion] per catastrophe year, in the
  aggregate, for securities issued during that catastrophe year
  before the occurrence or series of occurrences that results in
  incurred losses in that year and securities issued on or after the
  date of that occurrence or series of occurrences, and regardless of
  whether for a single occurrence or a series of occurrences; and
               (2)  subject to the [$1 billion] maximum described by
  Subdivision (1), may be issued, in one or more issuances or
  tranches, during the calendar year in which the occurrence or
  series of occurrences occurs or, if the public securities cannot
  reasonably be issued in that year, during the following calendar
  year.
         (c)  If public securities are issued as described by this
  section, the public securities shall be repaid in the manner
  prescribed by Subchapter M [from association premium revenue].
         (d)  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 to the association to enable the association to pay
  losses under this section or to obtain public securities under this
  section. For purposes of this subsection, financial instruments
  includes commercial paper.
         (e)  The proceeds of any outstanding public securities
  described by Subsection (a) that are issued before an occurrence or
  series of occurrences, together with the proceeds of any
  outstanding Class 1 public securities issued on or before June 1,
  2015, shall be depleted before the proceeds of any securities
  issued after an occurrence or series of occurrences may be
  used.  This subsection does not prohibit the association from
  issuing securities after an occurrence or series of occurrences
  before the proceeds of outstanding public securities issued during
  a previous catastrophe year have been depleted.
         (f)  If, under Subsection (e), the proceeds of any
  outstanding public securities issued during a previous catastrophe
  year, together with the proceeds of any outstanding Class 1 public
  securities issued on or before June 1, 2015, must be depleted, those
  proceeds shall count against the [$1 billion] limit on public
  securities described by this section in the catastrophe year in
  which the proceeds must be depleted.
         SECTION 7.  Subchapter B-1, Chapter 2210, Insurance Code, is
  amended by adding Section 2210.0725 to read as follows:
         Sec. 2210.0725.  PAYMENT FROM CLASS 1 ASSESSMENTS.
  (a)  Losses in a catastrophe year not paid under Sections 2210.0715
  and 2210.072 shall be paid as provided by this section from Class 1
  member assessments not to exceed $500 million for that catastrophe
  year.
         (b)  The association, with the approval of the commissioner,
  shall notify each member of the amount of the member's assessment
  under this section. The proportion of the losses allocable to each
  insurer under this section shall be determined in the manner used to
  determine each insurer's participation in the association for the
  year under Section 2210.052.
         (c)  A member of the association may not recoup an assessment
  paid under this section through a premium surcharge or tax credit.
         SECTION 8.  Section 2210.073, Insurance Code, is amended to
  read as follows:
         Sec. 2210.073.  PAYMENT FROM CLASS 2 PUBLIC SECURITIES.  
  (a)  Losses not paid under Sections 2210.0715, [2210.071 and]
  2210.072, and 2210.0725 shall be paid as provided by this section
  from the proceeds from Class 2 public securities authorized to be
  issued in accordance with Subchapter M on or after the date of any
  occurrence or series of occurrences that results in insured losses
  [under this subsection].  Public securities issued under this
  section must be paid [repaid] within a period not to exceed 10
  years[,] and may be paid [repaid] sooner if the board of directors
  elects to do so and the commissioner approves.
         (b)  Public securities described by Subsection (a):
               (1)  shall [may] be issued as necessary in a principal
  amount not to exceed $250 million [$1 billion] per catastrophe
  year, in the aggregate, whether for a single occurrence or a series
  of occurrences; and
               (2)  subject to the [$1 billion] maximum described by
  Subdivision (1), may be issued, in one or more issuances or
  tranches, during the calendar year in which the occurrence or
  series of occurrences occurs or, if the public securities cannot
  reasonably be issued in that year, during the following calendar
  year.
         (c)  If the losses are paid with public securities described
  by this section, the public securities shall be paid [repaid] in the
  manner prescribed by Subchapter M.
         SECTION 9.  Section 2210.074, Insurance Code, is amended to
  read as follows:
         Sec. 2210.074.  PAYMENT THROUGH CLASS 2 ASSESSMENTS [3
  PUBLIC SECURITIES]. (a)  Losses in a catastrophe year not paid
  under Sections 2210.0715, [2210.071,] 2210.072, 2210.0725, and
  2210.073 shall be paid as provided by this section from Class 2
  member assessments not to exceed $250 million for that catastrophe
  year.
         (b)  The association, with the approval of the commissioner,
  shall notify each member of the amount of the member's assessment
  under this section. The proportion of the losses allocable to each
  insurer under this section shall be determined in the manner used to
  determine each insurer's participation in the association for the
  year under Section 2210.052.
         (c)  A member of the association may not recoup an assessment
  paid under this section through a premium surcharge or tax credit
  [proceeds from public securities authorized to be issued in
  accordance with Subchapter M on or after the date of any occurrence
  that results in insured losses under this subsection or through
  reinsurance as described by Section 2210.075.     Public securities
  issued under this section must be repaid 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.
         [(b)  Public securities described by Subsection (a):
               [(1)     may be issued as necessary in a principal amount
  not to exceed $500 million per catastrophe year, in the aggregate,
  whether for a single occurrence or a series of occurrences; and
               [(2)     subject to the $500 million maximum described by
  Subdivision (1), may be issued, in one or more issuances or
  tranches, during the calendar year in which the occurrence or
  series of occurrences occurs or, if the public securities cannot
  reasonably be issued in that year, during the following calendar
  year.
         [(c)     If the losses are paid with public securities described
  by this section, the public securities shall be repaid in the manner
  prescribed by Subchapter M through member assessments as provided
  by this section.     The association shall notify each member of the
  association of the amount of the member's assessment under this
  section.     The proportion of the losses allocable to each insurer
  under this section shall be determined in the manner used to
  determine each insurer's participation in the association for the
  year under Section 2210.052.   A member of the association may not
  recoup an assessment paid under this subsection through a premium
  surcharge or tax credit].
         SECTION 10.  Subchapter B-1, Chapter 2210, Insurance Code,
  is amended by adding Sections 2210.0741 and 2210.0742 to read as
  follows:
         Sec. 2210.0741.  PAYMENT THROUGH CLASS 3 PUBLIC SECURITIES.
  (a)  Losses not paid under Sections 2210.0715, 2210.072,
  2210.0725, 2210.073, and 2210.074 shall be paid as provided by this
  section from the proceeds from Class 3 public securities authorized
  to be issued in accordance with Subchapter M on or after the date of
  any occurrence or series of occurrences that results in insured
  losses.  Public securities issued under this section must be paid
  within a period not to exceed 10 years, and may be paid sooner if the
  board of directors elects to do so and the commissioner approves.
         (b)  Public securities described by Subsection (a):
               (1)  shall be issued as necessary in a principal amount
  not to exceed $250 million per catastrophe year, in the aggregate,
  whether for a single occurrence or a series of occurrences; and
               (2)  subject to the maximum described by Subdivision
  (1), may be issued, in one or more issuances or tranches, during the
  calendar year in which the occurrence or series of occurrences
  occurs or, if the public securities cannot reasonably be issued in
  that year, during the following calendar year.
         (c)  If the losses are paid with public securities described
  by this section, the public securities shall be paid in the manner
  prescribed by Subchapter M.
         Sec. 2210.0742.  PAYMENT FROM CLASS 3 ASSESSMENTS.
  (a)  Losses in a catastrophe year not paid under Sections
  2210.0715, 2210.072, 2210.0725, 2210.073, 2210.074, and 2210.0741
  shall be paid as provided by this section from Class 3 member
  assessments not to exceed $250 million for that catastrophe year.
         (b)  The association, with the approval of the commissioner,
  shall notify each member of the amount of the member's assessment
  under this section. The proportion of the losses allocable to each
  insurer under this section shall be determined in the manner used to
  determine each insurer's participation in the association for the
  year under Section 2210.052.
         (c)  A member of the association may not recoup an assessment
  paid under this section through a premium surcharge or tax credit.
         SECTION 11.  Section 2210.075, Insurance Code, is amended to
  read as follows:
         Sec. 2210.075.  REINSURANCE. (a)  Before any occurrence or
  series of occurrences, an insurer may elect to purchase reinsurance
  to cover an assessment for which the insurer would otherwise be
  liable under this subchapter [Section 2210.074(c)].
         (b)  An insurer must notify the board of directors, in the
  manner prescribed by the association whether the insurer will be
  purchasing reinsurance.  If the insurer does not elect to purchase
  reinsurance under this section, the insurer remains liable for any
  assessment imposed under this subchapter [Section 2210.074(c)].
         SECTION 12.  Section 2210.102, Insurance Code, is amended by
  amending Subsections (b), (c), (d), (e), and (f) and adding
  Subsection (c-1) to read as follows:
         (b)  Three [Four] members must be representatives of the
  insurance industry who actively write and renew windstorm and hail
  insurance in the first tier coastal counties.
         (c)  Three [Four] members must, as of the date of the
  appointment, reside in the first tier coastal counties.  Each of
  the following regions must be represented by a member residing in
  the region and [At least one of the members] appointed under this
  subsection:
               (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 and any part of Harris
  County designated as a catastrophe area under Section 2210.005.
         (c-1)  One of the members appointed under Subsection (c) must
  be a property and casualty agent who is licensed under this code and
  is not a captive agent.
         (d)  Three members [One member] must reside in [be a
  representative of] an area of this state that is [not] located more
  than 100 miles from the Texas coastline [in the seacoast territory
  with demonstrated expertise in insurance and actuarial
  principles].
         (e)  All members must have demonstrated experience in
  insurance, general business, or actuarial principles and the
  member's area of expertise, if any, 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 commissioner.  The nominee slate submitted to
  the commissioner under this subsection must include at least three
  more names than the number of vacancies.  The commissioner may 
  [shall] appoint replacement insurance industry representatives
  from the nominee slate.
         SECTION 13.  Section 2210.103(c), Insurance Code, is amended
  to read as follows:
         (c)  A member of the board of directors may be removed by the
  commissioner with cause stated in writing and posted on the
  association's website.  The commissioner shall appoint a
  replacement in accordance with [the manner provided by] Section
  2210.102 for a member who leaves or is removed from the board of
  directors.
         SECTION 14.  Section 2210.258, Insurance Code, is amended by
  amending Subsections (a) and (b) and adding Subsection (d) to read
  as follows:
         (a)  Except as provided by Subsections [Subsection] (c) and
  (d) and Section 2210.2581 and notwithstanding any other provision
  of this chapter, to be eligible for insurance through the
  association, all construction, alteration, remodeling,
  enlargement, and repair of, or addition to, any structure located
  in the catastrophe area that is begun on or after the effective date
  of Sections 5 through 49, H.B. No. 4409, Acts of the 81st
  Legislature, Regular Session, 2009, must be performed in compliance
  with the applicable building code standards, as set forth in the
  plan of operation.
         (b)  Except as provided by Subsections [Subsection] (c) and
  (d), the association may not insure a structure described by
  Subsection (a) until:
               (1)  the structure has been inspected for compliance
  with the plan of operation in accordance with Section 2210.251(a);
  and
               (2)  a certificate of compliance has been issued for
  the structure in accordance with Section 2210.251(g).
         (d)  The association may insure a structure described by
  Subsection (a) for a policy term not to exceed 30 days if an
  inspection verification form or other inspection form adopted by
  the department has been issued for the structure for purposes of
  providing temporary coverage while an applicant seeks to secure a
  certificate of compliance for the structure if the structure is
  otherwise insurable property.
         SECTION 15.  Section 2210.2581, Insurance Code, is amended
  to read as follows:
         Sec. 2210.2581.  MANDATORY COMPLIANCE WITH BUILDING
  STANDARDS; CERTAIN STRUCTURES.  Except as provided by Sections
  [Section] 2210.251(d) and (e) and Section 2210.258(d), and
  notwithstanding Sections 2210.258(a), (b), and (c) [Section
  2210.258] or any other provision of this chapter, on and after
  December 31, 2015, the association may not issue or renew insurance
  coverage for a structure unless the structure complies with the
  applicable building code standards in effect on the date the
  construction, alteration, remodeling, enlargement, or repair of,
  or addition to, the structure begins, as set forth in the plan of
  operation.
         SECTION 16.  Section 2210.355(b), Insurance Code, is amended
  to read as follows:
         (b)  In adopting rates under this chapter, the following must
  be considered:
               (1)  the past and prospective loss experience within
  and outside this state of hazards for which insurance is made
  available through the plan of operation, if any;
               (2)  expenses of operation, including acquisition
  costs;
               (3)  a reasonable margin for profit and contingencies;
               (4)  payment of public security obligations [for Class
  1 public securities] issued under this chapter, including the
  additional amount of any debt service coverage determined by the
  association to be required for the issuance of marketable public
  securities; and
               (5)  all other relevant factors, within and outside
  this state.
         SECTION 17.  The heading to Subchapter J, Chapter 2210,
  Insurance Code, is amended to read as follows:
  SUBCHAPTER J.  CATASTROPHE RESERVE TRUST FUND; [AND] REINSURANCE
  AND ALTERNATIVE RISK FINANCING [PROGRAM]
         SECTION 18.  Section 2210.452, Insurance Code, is amended by
  amending Subsections (a), (c), and (d) and adding Subsection (f) to
  read as follows:
         (a)  The commissioner shall adopt rules under which the
  association makes payments to the catastrophe reserve trust fund.
  Except as otherwise specifically provided by this section, the
  [The] trust fund may be used only for purposes directly related to
  funding the payment of insured losses, including:
               (1)  funding [to fund] the obligations of the trust
  fund under Subchapter B-1; and
               (2)  purchasing reinsurance or using alternative risk
  financing mechanisms under Section 2210.453.
         (c)  At the end of each calendar year or policy year, the
  association shall use the net gain from operations of the
  association, 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, [to] procure
  reinsurance, or use alternative risk financing mechanisms, or to
  make payments to the trust fund and [to] procure reinsurance or use
  alternative risk financing mechanisms.
         (d)  The commissioner by rule shall establish the procedure
  relating to the disbursement of money from the trust fund to
  policyholders and for association administrative expenses directly
  related to funding the payment of insured losses in the event of an
  occurrence or series of occurrences within a catastrophe area that
  results in a disbursement under Subchapter B-1.
         (f)  The commissioner by rule shall establish the procedure
  relating to the disbursement of money from the trust fund to pay for
  operating expenses, including reinsurance or alternative risk
  financing mechanisms under Section 2210.453, if the association
  does not have sufficient premium and other revenue.
         SECTION 19.  Subchapter J, Chapter 2210, Insurance Code, is
  amended by adding Section 2210.4521 to read as follows:
         Sec. 2210.4521.  INVESTMENT OF TRUST FUND BALANCES.
  (a)  The comptroller shall invest in accordance with the investment
  standard described by Section 404.024(j), Government Code, the
  portion of the trust fund balance that exceeds the amount of the
  sufficient balance determined under Subsection (b). The
  comptroller's investment of that portion of the balance is not
  subject to any other limitation or other requirement provided by
  Section 404.024, Government Code.
         (b)  At least once each 12-month period, the board of
  directors shall determine a balance for the trust fund that the
  board considers to be sufficient to meet the cash flow requirements
  of the fund in funding the payment of insured losses as provided by
  Section 2210.452(a).  After determining that sufficient balance,
  the board shall provide notice of the sufficient balance to the
  comptroller.
         (c)  Not later than the 30th day after the date the board of
  directors provides notice of the sufficient balance determined
  under Subsection (b), the comptroller shall adjust the investment
  portfolio of trust fund money to ensure that only the portion of the
  fund that exceeds the sufficient balance is invested as required by
  Subsection (a).
         (d)  The comptroller shall include the fair market value of
  the investment portfolio of the trust fund in calculating the
  amount in the fund for purposes of this chapter.
         SECTION 20.  Section 2210.453, Insurance Code, is amended to
  read as follows:
         Sec. 2210.453.  FUNDING LEVELS; REINSURANCE AND ALTERNATIVE
  RISK FINANCING MECHANISMS. (a)  The association may[:
               [(1)  make payments into the trust fund; and
               [(2)]  purchase reinsurance or use alternative risk
  financing mechanisms or both as necessary.
         (b)  The association shall maintain total available loss
  funding in an amount not less than the probable maximum loss for the
  association for a catastrophe year with a probability of one in 100.
  If necessary, the required funding level shall be achieved through
  the [may] purchase of reinsurance or the use of alternative
  financing mechanisms, or both, to operate [that operates] in
  addition to or in concert with the trust fund, public securities,
  financial instruments, and assessments authorized by this chapter.
         (c)  The attachment point for reinsurance purchased under
  this section may not be less than the aggregate amount of all
  funding available to the association under Subchapter B-1.  [If the
  association does not purchase reinsurance as authorized by this
  section, the board, not later than June 1 of each year, shall submit
  to the commissioner, the legislative oversight board established
  under Subchapter N, the governor, the lieutenant governor, and the
  speaker of the house of representatives a report containing an
  actuarial plan for paying losses in the event of a catastrophe with
  estimated damages of $2.5 billion or more.   The report required by
  this subsection must:
               [(1)     document and denominate the association's
  resources available to pay claims, including cash or other highly
  liquid assets, assessments that the association is projected to
  impose, pre-event and post-event bonding capacity, and
  private-sector recognized risk-transfer mechanisms, including
  catastrophe bonds and reinsurance;
               [(2)     include an independent, third-party appraisal of
  the likelihood of an assessment, the maximum potential size of the
  assessment, and an estimate of the probability that the assessment
  would not be adequate to meet the association's needs; and
               [(3)     include an analysis of financing alternatives to
  assessments that includes the costs of borrowing and the
  consequences that additional purchase of reinsurance, catastrophe
  bonds, or other private-sector recognized risk-transfer
  instruments would have in reducing the size or potential of
  assessments.
         [(d)     A person who prepares a report required by Subsection
  (c) may not contract to provide any other service to the
  association, except for the preparation of similar reports, before
  the third anniversary of the date the last report prepared by the
  person under that subsection is submitted.
         [(e)     The report submitted under this section is for
  informational purposes only and does not bind the association to a
  particular course of action.]
         SECTION 21.  Section 2210.602, Insurance Code, is amended by
  amending Subdivision (4) and adding Subdivisions (2-a), (3-a), and
  (4-a) to read as follows:
               (2-a)  "Class 1 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 2210.612 for the purpose of paying Class 1
  public securities are deposited.
               (3-a)  "Class 2 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 2210.613 for the purpose of paying Class 2
  public securities are deposited.
               (4)  "Class 3 public securities" means public
  securities authorized to be issued on or after the occurrence of a
  catastrophic event by Section 2210.0741 [2210.074].
               (4-a)  "Class 3 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 2210.6131 for the purpose of paying Class 3
  public securities are deposited.
         SECTION 22.  Section 2210.609, Insurance Code, is amended to
  read as follows:
         Sec. 2210.609.  REPAYMENT OF ASSOCIATION'S PUBLIC SECURITY
  OBLIGATIONS.  (a)  The board and the association shall enter into
  an agreement under which the association shall provide for the
  payment of all public security obligations from available funds
  collected by the association and deposited as required by this
  subchapter [into the public security obligation revenue fund].  If
  the association determines that it is unable to pay the public
  security obligations and public security administrative expenses,
  if any, with available funds, the association shall pay those
  obligations and expenses in accordance with Sections 2210.612,
  2210.613, and 2210.6131 [2210.6135, and 2210.6136] as applicable.  
  Class 1, Class 2, or Class 3 public securities may be issued on a
  parity or subordinate lien basis with other Class 1, Class 2, or
  Class 3 public securities, respectively.
         (b)  If any public securities issued under this chapter 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[,
  assess members of the association under Sections 2210.613 and
  2210.6135,] and assess a premium surcharge if necessary.
         (c)  The association shall deposit all revenue collected
  under Section 2210.612 in the Class 1 public security trust [public
  security obligation revenue] fund, all revenue collected under
  Section 2210.613 [2210.613(b)] in the Class 2 public security trust
  fund [premium surcharge trust fund], and all revenue collected
  under Section 2210.6131 [Sections 2210.613(a) and 2210.6135] in the
  Class 3 public security [member assessment] trust fund.  Money
  deposited in a fund 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 to ensure timely payment of obligations and expenses.  
  This may include the board establishing 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 Class 1 public
  security trust [public security obligation revenue] fund, the Class
  2 public security [premium surcharge] trust fund, or the Class 3
  public security trust fund [member assessment trust fund] to the
  appropriate account the amount necessary to pay the public security
  obligation.
         (d)  The association shall provide for the payment of the
  public security obligations and the public security administrative
  expenses by irrevocably pledging revenues received from premiums,
  [member assessments,] premium surcharges, and amounts on deposit in
  the Class 1 public security trust [public security obligation
  revenue] fund, the Class 2 public security [premium surcharge]
  trust fund, and the Class 3 public security trust fund [member
  assessment trust fund], together with any public security reserve
  fund, as provided in the proceedings authorizing the public
  securities and related credit agreements.
         (e)  An amount owed by the board under a credit agreement
  shall be payable from and secured by a pledge of revenues received
  by the association [or amounts] from the Class 1 public security
  [obligation] trust fund, the Class 2 public security [premium
  surcharge] trust fund, and the Class 3 public security trust fund 
  [member assessment trust fund] to the extent provided in the
  proceedings authorizing the credit agreement.
         SECTION 23.  Section 2210.610(a), Insurance Code, is amended
  to read as follows:
         (a)  Revenues received from the premium surcharges under
  Sections 2210.612, [Section] 2210.613, and 2210.6131 [and member
  assessments under Sections 2210.613 and 2210.6135] may be applied
  only as provided by this subchapter.
         SECTION 24.  Section 2210.611, Insurance Code, is amended to
  read as follows:
         Sec. 2210.611.  EXCESS REVENUE COLLECTIONS AND INVESTMENT
  EARNINGS. Revenue collected in any calendar year from a premium
  surcharge under Sections 2210.612, [Section] 2210.613, and
  2210.6131 [member assessments under Sections 2210.613 and
  2210.6135] that exceeds the amount of the public security
  obligations and public security administrative expenses payable in
  that calendar year and interest earned on the funds [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 [and member assessments, as applicable,] that would
  otherwise be required to be levied for the year under this
  subchapter;
               (2)  used to redeem or purchase outstanding public
  securities; or
               (3)  deposited in the catastrophe reserve trust fund.
         SECTION 25.  Section 2210.612, Insurance Code, is amended to
  read as follows:
         Sec. 2210.612.  PAYMENT OF CLASS 1 PUBLIC SECURITIES.
  (a)  The association shall pay Class 1 public securities issued
  under Section 2210.072 from:
               (1)  [its] net premium and other revenue; and
               (2)  if net premium and other revenue are not
  sufficient to pay the securities, a catastrophe area premium
  surcharge collected in accordance with this section.
         (b)  On approval by the commissioner, the association shall
  assess, as provided by this section, a premium surcharge to each
  policyholder of a policy described by Subsection (c). 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 all policyholders of association policies issued under
  this chapter.
         (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.
         (e)  The association may enter financing arrangements as
  described by Section 2210.072(d) as necessary to obtain public
  securities issued under Section 2210.072.  Nothing in this
  subsection shall prevent the authorization and creation of one or
  more programs for the issuance of commercial paper before the date
  of an occurrence or series of occurrences that results in insured
  losses under Section 2210.072(a).
         SECTION 26.  Section 2210.613, Insurance Code, is amended to
  read as follows:
         Sec. 2210.613.  PAYMENT OF CLASS 2 PUBLIC SECURITIES.
  (a)  The association shall pay Class 2 public securities issued
  under Section 2210.073 from:
               (1)  net premium and other revenue; and
               (2)  if net premium and other revenue are not
  sufficient to pay the securities, a catastrophe area premium
  surcharge collected in accordance with this section.
         (b)  On approval by the commissioner, the association shall
  assess, as provided by this section, a premium surcharge to each
  policyholder of a policy described by Subsection (c).  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 [as provided by this section.   Thirty percent of
  the cost of the public securities shall be paid through member
  assessments as provided by this section.   The association shall
  notify each member of the association of the amount of the member's
  assessment under this section.   The proportion of the losses
  allocable to each insurer under this section shall be determined in
  the manner used to determine each insurer's participation in the
  association for the year under Section 2210.052.   A member of the
  association may not recoup an assessment paid under this subsection
  through a premium surcharge or tax credit].
         [(b)     Seventy percent of the cost of the public securities
  shall be paid by a premium surcharge collected under this section in
  an amount set by the commissioner.     On approval by the
  commissioner, each insurer, the association, and the Texas FAIR
  Plan Association shall assess, as provided by this section, a
  premium surcharge to each policyholder of a policy 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 or member assessments and all
  related expenses on the public securities.]
         (c)  The premium surcharge under this section [Subsection
  (b)] shall be assessed on all policyholders of association policies
  issued under this chapter [that cover insured property that is
  located in a catastrophe area, including automobiles principally
  garaged in a catastrophe area.   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 automobiles and other property located
  in the catastrophe area.   A premium surcharge under Subsection (b)
  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 [Subsection (b)]
  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.
         SECTION 27.  Subchapter M, Chapter 2210, Insurance Code, is
  amended by adding Sections 2210.6131 and 2210.6132 to read as
  follows:
         Sec. 2210.6131.  PAYMENT OF CLASS 3 PUBLIC SECURITIES.
  (a)  The association shall pay Class 3 public securities issued
  under Section 2210.0741 from:
               (1)  net premium and other revenue; and
               (2)  if net premium and other revenue are not
  sufficient to pay the securities, a catastrophe area premium
  surcharge collected in accordance with this section.
         (b)  On approval by the commissioner, the association shall
  assess, as provided by this section, a premium surcharge to each
  policyholder of a policy described by Subsection (c).  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 all policyholders of association policies issued under
  this chapter.
         (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. 2210.6132.  CONTINGENT SOURCE OF PAYMENT FOR CLASS 2
  AND CLASS 3 PUBLIC SECURITIES. (a)  The commissioner may
  determine, in consultation with the board and the authority, that:
               (1)  the authority is unable to issue Class 2 or Class 3
  public securities to be payable under Section 2210.613 or
  2210.6131, as applicable; or
               (2)  the issuance of Class 2 or Class 3 public
  securities to be payable under Section 2210.613 or 2210.6131, as
  applicable, is financially unreasonable for the association.
         (b)  If the commissioner makes a determination under
  Subsection (a), the commissioner shall order the Class 2 or Class 3
  public securities, as applicable, to be paid by a premium surcharge
  assessed by each insurer, the association, and the Texas FAIR Plan
  Association on all policyholders of policies that are in effect on
  or after the 180th day after the date the commissioner issues the
  order.  The premium surcharge must be set in an amount sufficient
  to pay all debt service not already covered by available funds and
  all related expenses on the public securities.
         (c)  The premium surcharge under this section shall be
  assessed on all policyholders of policies that cover insured
  property that is located in a catastrophe area, including
  automobiles principally garaged in a catastrophe area. The premium
  surcharge shall be assessed on each Texas windstorm and hail
  insurance policy and each property and casualty policy, including
  an automobile insurance policy, issued for automobiles and other
  property located in the catastrophe area.  A premium surcharge
  under Subsection (b) 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.
         SECTION 28.  Section 2210.616(a), Insurance Code, is amended
  to read as follows:
         (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 [member assessments and]
  premium surcharges or the deposit of those funds into the
  applicable [member assessment trust fund or premium surcharge]
  trust fund;
               (2)  reduce, alter, or impair the [member assessments
  or] 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.
         SECTION 29.  Section 2210.6165, Insurance Code, is amended
  to read as follows:
         Sec. 2210.6165.  PROPERTY RIGHTS.  If public securities
  issued under this subchapter are outstanding, the rights and
  interests of the association, a successor to the association, any
  member of the association, or any member of the Texas FAIR Plan
  Association, including the right to impose, collect, and receive a
  premium surcharge [or a member assessment] authorized under this
  subchapter, are only contract rights until those revenues are first
  pledged for the repayment of the association's public security
  obligations as provided by Section 2210.609.
         SECTION 30.  Chapter 2210, Insurance Code, is amended by
  adding Subchapter O to read as follows:
  SUBCHAPTER O. DEPOPULATION PROGRAM
         Sec. 2210.701.  DEPOPULATION PROGRAM. (a)  The association
  shall administer, subject to commissioner approval, a depopulation
  program that encourages the transfer of association policies to
  insurers through the voluntary market or assumption reinsurance.
         (b)  An insurer engaged in the business of property and
  casualty insurance in this state may elect to participate in the
  depopulation program.
         Sec. 2210.702.  ASSUMPTION REINSURANCE DEPOPULATION.
  (a)  The association shall make available to insurers who elect to
  participate in the depopulation program association policy
  information necessary for the insurers to determine whether to
  reinsure a policy ceded to the insurer by the association. The
  commissioner shall by rule establish the information that is
  necessary to provide to an insurer under this subsection.
         (b)  If an insurer elects to reinsure a policy under this
  section, the reinsurance must be provided as assumption reinsurance
  by novation and the insurer is legally and contractually
  responsible for the association policy ceded to the insurer on the
  effective date of the reinsurance agreement regardless of whether
  the association continues to provide some services on the policy.
  The association is not liable under the policy on and after the
  effective date of the assumption reinsurance agreement. Except as
  specifically provided in an agreement between the association and
  the insurer, the insurer shall administer the policy and process,
  adjust, and pay claims in accordance with the policy.
         (c)  If an insurer elects to provide reinsurance under this
  section, the insurer shall comply with the applicable provisions of
  Chapters 202 and 493.
         Sec. 2210.703.  RENEWAL OF REINSURED POLICIES; COMPARABLE
  COVERAGE. (a)  An insurer electing to offer a policy under Section
  2210.702 shall offer a renewal of that policy to the association
  policyholder for each of the next three years subject to the
  insurer's rate and underwriting guidelines as filed under this
  code.
         (b)  An insurer may not offer a policy to an association
  policyholder under this section unless the policy contains
  generally comparable coverage and premiums to the association
  policy as determined by commissioner rule.  The premiums for a
  policy of generally comparable coverage may not exceed 115 percent
  of the premiums for the association policy.
         (c)  Subchapter L-1 does not apply to a policy renewed under
  this section.
         Sec. 2210.704.  CONFIDENTIALITY OF INFORMATION; USE OF
  POLICYHOLDER'S AGENT. (a)  An insurer may use information
  concerning a specific policy or insured provided by the association
  under Section 2210.702(a) only for the purposes of this subchapter
  and may not use or disclose the information for any other purpose.
         (b)  If an insurer elects to renew a policy for an
  association policyholder identified from information provided to
  the insurer under Section 2210.702, the insurer must offer the
  policy through the insurance agent of record for the association
  policyholder under the prevailing terms, conditions, and
  commissions of the agent.
         (c)  An insurer that offers to renew a policy under Section
  2210.703 shall allow the policyholder's agent to enter into a
  limited service agreement with the insurer for the agent to
  continue to provide services to the policyholder.
         Sec. 2210.705.  TRANSFER OF POLICIES. The commissioner
  shall by rule establish the procedure for the transfer of reinsured
  policies.  The rule must provide that a reinsurance agreement
  include:
               (1)  an offer commencement date of December 1;
               (2)  the opportunity for the policyholder to opt out of
  the reinsurance agreement on or before May 31; 
               (3)  a transfer of the earned premium on a reinsured
  policy to a trust account to be held until the expiration of the
  opt-out period described by Subdivision (2) when the earned premium
  for the final reinsured policy will be transferred to the
  reinsurer;
               (4)  a period of not less than 60 days for the agent of
  record to accept an appointment or other written agreement with the
  reinsurer; and
               (5)  any other requirements as the commissioner
  determines necessary for the protection of policyholders and the
  policyholders' agents.
         SECTION 31.  The following provisions of the Insurance Code
  are repealed:
               (1)  Sections 2210.102(g) and (h);
               (2)  Sections 2210.602(5-a), (6), (6-b), (6-c), and
  (10);
               (3)  Section 2210.605(c); and
               (4)  Sections 2210.6135 and 2210.6136.
         SECTION 32.  (a)  The board of directors of the Texas
  Windstorm Insurance Association established under Section
  2210.102, Insurance Code, as that section existed before amendment
  by this Act, is abolished effective October 1, 2015.
         (b)  The commissioner shall appoint the members of the board
  of directors of the Texas Windstorm Insurance Association under
  Section 2210.102, Insurance Code, as amended by this Act, effective
  October 1, 2015.  The initial directors shall draw lots to achieve
  staggered terms, with three of the directors serving one-year
  terms, three of the directors serving two-year terms, and three of
  the directors serving three-year terms.
         (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 October 1, 2015. Such a person is
  eligible for appointment by the commissioner to the new board of
  directors of the Texas Windstorm Insurance Association under
  Section 2210.102, Insurance Code, as amended by this Act.
         (d)  It is the intent of the legislature that each member of
  the legislative oversight board appointed under Section 2210.652,
  Insurance Code, and serving on the effective date of this Act
  continues to serve after the effective date of this Act until a
  successor is appointed under that section.
         SECTION 33.  Subchapter M, Chapter 2210, Insurance Code, as
  it existed before the effective date of this Act, is applicable to
  bond obligations incurred under Chapter 2210, Insurance Code,
  before the effective date of this Act, and that law is continued in
  effect for that purpose.
         SECTION 34.  As soon as practicable after the effective date
  of this Act, the board of directors of the Texas Windstorm Insurance
  Association shall propose amendments to the plan of operation of
  the association and the commissioner of insurance shall adopt rules
  to implement Subchapter O, Chapter 2210, Insurance Code, as added
  by this Act.
         SECTION 35.  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, 2015.
 
 
 
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
         I hereby certify that S.B. No. 900 passed the Senate on
  April 27, 2015, by the following vote: Yeas 22, Nays 8; and that
  the Senate concurred in House amendments on May 28, 2015, by the
  following vote: Yeas 24, Nays 7.
 
 
  ______________________________
  Secretary of the Senate    
 
         I hereby certify that S.B. No. 900 passed the House, with
  amendments, on May 25, 2015, by the following vote: Yeas 97,
  Nays 44, two present not voting.
 
 
  ______________________________
  Chief Clerk of the House   
 
 
 
  Approved:
 
  ______________________________ 
              Date
 
 
  ______________________________ 
            Governor