86R14232 PMO-D
 
  By: King of Hemphill H.B. No. 3076
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the establishment of the Texas Tornado and Wildfire
  Insurance Association; authorizing fees.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Subtitle G, Title 10, Insurance Code, is amended
  by adding Chapter 2214 to read as follows:
  CHAPTER 2214. TEXAS TORNADO AND WILDFIRE INSURANCE ASSOCIATION
  SUBCHAPTER A. GENERAL PROVISIONS
         Sec. 2214.001.  PURPOSE. The primary purpose of the Texas
  Tornado and Wildfire Insurance Association is the provision of an
  adequate market for property insurance to provide coverage for
  losses from tornado and wildfire in this state.  The legislature
  finds that the provision of adequate tornado and wildfire insurance
  is necessary to the economic welfare of this state, and without that
  insurance, the orderly growth and development of this state would
  be severely impeded.  This chapter provides a method by which
  adequate tornado and wildfire insurance may be obtained in this
  state.  The association is intended to serve as a residual insurer
  of last resort for tornado and wildfire insurance in this state.  
  The association shall:
               (1)  function in such a manner as to not be a direct
  competitor in the private market; and
               (2)  provide tornado and wildfire insurance coverage to
  those who are unable to obtain that coverage in the private market.
         Sec. 2214.002.  SHORT TITLE; COVERAGE AVAILABLE. (a) This
  chapter may be cited as the Texas Tornado and Wildfire Insurance
  Association Act.
         (b)  This chapter authorizes the association to issue only
  tornado and wildfire insurance.
         Sec. 2214.003.  GENERAL DEFINITIONS. In this chapter,
  unless the context clearly indicates otherwise:
               (1)  "Association" means the Texas Tornado and Wildfire
  Insurance Association.
               (2)  "Board of directors" means the board of directors
  of the association.
               (3)  "Net direct premium" means gross direct written
  premium less return premium on each canceled contract, regardless
  of assumed or ceded reinsurance, that is written on property in this
  state, as defined by the board of directors.
               (4)  "Plan of operation" means the plan adopted under
  this chapter for the operation of the association.
               (5)  "Tornado and wildfire insurance" means deductible
  insurance against:
                     (A)  direct loss to insurable property incurred as
  a result of tornado or wildfire, as those terms are defined and
  limited in policies and forms approved by the department; and
                     (B)  indirect losses resulting from the direct
  loss.
               (6)  "Wildfire" means an uncontrolled blaze fueled by
  weather, wind, and dry underbrush, trees, grasses, or other
  flammable material.
         Sec. 2214.004.  DEFINITION OF INSURABLE PROPERTY. For
  purposes of this chapter and subject to this section, "insurable
  property" has the meaning assigned by the plan of operation.
         Sec. 2214.005.  DESIGNATION AS CATASTROPHE AREA; REVOCATION
  OF DESIGNATION. An area of this state may be designated as a
  catastrophe area in the plan of operation.  The commissioner by rule
  may revoke the designation.
         Sec. 2214.006.  APPLICABILITY OF CHAPTER TO CERTAIN
  INSURERS. (a) Except as provided by Subsection (b), this chapter
  applies to each insurer authorized to engage in the business of
  property insurance in this state, including a county mutual
  insurance company, a Lloyd's plan, and a reciprocal or
  interinsurance exchange.
         (b)  This chapter does not apply to:
               (1)  a farm mutual insurance company operating under
  Chapter 911;
               (2)  a nonaffiliated county mutual fire insurance
  company described by Section 912.310 that is writing exclusively
  industrial fire insurance policies as described by Section
  912.310(a)(2); or
               (3)  a mutual insurance company or a statewide mutual
  assessment company engaged in business under Chapter 12 or 13,
  Title 78, Revised Statutes, respectively, before those chapters'
  repeal by Section 18, Chapter 40, Acts of the 41st Legislature, 1st
  Called Session, 1929, as amended by Section 1, Chapter 60, General
  Laws, Acts of the 41st Legislature, 2nd Called Session, 1929, that
  retains the rights and privileges under the repealed law to the
  extent provided by those sections.
         Sec. 2214.007.  DEPARTMENT ORDERS; GENERAL RULEMAKING
  AUTHORITY. (a) The commissioner may issue any orders that the
  commissioner considers necessary to implement this chapter.
         (b)  The commissioner may adopt rules in the manner
  prescribed by Subchapter A, Chapter 36, as reasonable and necessary
  to implement this chapter.
         Sec. 2214.008.  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 this state.
         (b)  The department shall develop incentive programs to
  encourage authorized insurers to write insurance on a voluntary
  basis and to minimize the use of the association as a means to
  obtain insurance.
  SUBCHAPTER B. ADMINISTRATION OF THE ASSOCIATION
         Sec. 2214.051.  COMPOSITION OF ASSOCIATION; REQUIRED
  MEMBERSHIP. (a) The association is composed of all property
  insurers authorized to engage in the business of property insurance
  in this state, other than insurers prevented by law from writing on
  a statewide basis coverages available through the association.
         (b)  As a condition of the insurer's authority to engage in
  the business of insurance in this state, each insurer subject to
  Subsection (a) must be a member of the association and must remain a
  member for the duration of the association's existence.  An insurer
  that ceases to be a member of the association remains liable on
  insurance contracts entered into during the insurer's membership in
  the association to the same extent and effect as if the insurer's
  membership in the association had not been terminated.
         (c)  An insurer that becomes authorized to write and is
  engaged in writing insurance that requires the insurer to be a
  member of the association shall become a member of the association
  on the January 1 following the effective date of that
  authorization.  The determination of the insurer's participation in
  the association is made as of the date of the insurer's membership
  in the manner used to determine participation for all other members
  of the association.
         Sec. 2214.052.  MEMBER PARTICIPATION IN ASSOCIATION. (a)
  Each member of the association shall participate in insured losses
  and operating expenses of the association, in excess of premium and
  other revenue of the association, in the proportion that the net
  direct premiums of that member during the preceding calendar year
  bears to the aggregate net direct premiums by all members of the
  association, as determined using the information provided under
  Subsection (b).
         (b)  The department shall review annual statements, other
  reports, and other statistics that the department considers
  necessary to obtain the information required under Subsection (a)
  and shall provide that information to the association.  The
  department is entitled to obtain the annual statements, other
  reports, and other statistics from any member of the association.
         (c)  Each member's participation in the association shall be
  determined annually in the manner provided by the plan of
  operation.  For purposes of determining participation in the
  association, two or more members that are subject to common
  ownership or that operate in this state under common management or
  control shall be treated as a single member.  The determination
  shall also include the net direct premiums of an affiliate that is
  under that common management or control, including an affiliate
  that is not authorized to engage in the business of property
  insurance in this state.
         (d)  Notwithstanding Subsection (a), a member, in accordance
  with the plan of operation, is entitled to receive credit for
  similar insurance voluntarily written in areas designated by the
  commissioner.  The member's participation in the insured losses and
  operating expenses of the association in excess of premium and
  other revenue of the association shall be reduced in accordance
  with the plan of operation.
         (e)  Notwithstanding Subsections (a)-(d), an insurer that
  becomes a member of the association and that has not previously been
  a member of the association is not subject to participation in any
  insured losses and operating expenses of the association in excess
  of premium and other revenue of the association until the second
  anniversary of the date on which the insurer first becomes a member
  of the association.
         Sec. 2214.053.  OPERATION OF ASSOCIATION. The association
  shall operate in accordance with the plan of operation.
         Sec. 2214.054.  ANNUAL STATEMENT. (a)  The association
  shall file annually with the department and the state auditor's
  office a statement covering periods designated by the department
  that summarizes the transactions, conditions, operations, and
  affairs of the association during the preceding year.
         (b)  The statement must:
               (1)  be filed at times designated by the department;
               (2)  contain the information prescribed by the
  department; and
               (3)  be in the form prescribed by the department.
         Sec. 2214.055.  USE OF ASSOCIATION ASSETS. (a) The
  association's net earnings may only be used in accordance with the
  plan of operation.
         (b)  On dissolution of the association, all assets of the
  association, other than assets pledged for the repayment of public
  securities issued under this chapter, revert to this state.
         Sec. 2214.056.  EXAMINATION OF ASSOCIATION. (a) The
  association is subject to Sections 401.051, 401.052,
  401.054-401.062, 401.151, 401.152, 401.155, and 401.156 and
  Subchapter A, Chapter 86.
         (b)  A final examination report of the association resulting
  from an examination as provided by this section is a public record
  and is available to the public at the offices of the department in
  accordance with Chapter 552, Government Code.
         Sec. 2214.057.  AUDIT OF ASSOCIATION. (a)  The association
  is subject to audit by the state auditor and shall pay the costs
  incurred by the state auditor in performing an audit under this
  section.
         (b)  The association shall pay the costs described by
  Subsection (a) promptly after receipt of a statement from the state
  auditor's office regarding the amount of those costs.
         Sec. 2214.058.  CLAIMS PRACTICES AUDIT. The commissioner,
  in the manner and at the time the commissioner determines to be
  necessary, may conduct a random audit of claim files concerning
  claims the bases of which are damage to property insured under this
  chapter.
  SUBCHAPTER C. PAYMENT OF LOSSES
         Sec. 2214.101.  PAYMENT OF LOSSES. The association shall
  pay insured losses and operating expenses of the association from
  premium and other revenue of the association in accordance with the
  plan of operation.
         Sec. 2214.102.  ASSESSMENTS. (a)  Losses not paid under
  Section 2214.101 shall be paid from member insurer assessments.
         (b)  A member of the association may not recoup an assessment
  paid under this subsection through a premium surcharge or tax
  credit.
  SUBCHAPTER D. BOARD OF DIRECTORS; POWERS AND DUTIES
         Sec. 2214.151.  ACCOUNTABLE TO COMMISSIONER. The board of
  directors is responsible and accountable to the commissioner.
         Sec. 2214.152.  COMPOSITION. (a)  The board of directors is
  composed of nine members appointed by the commissioner.
         (b)  All members must have demonstrated experience in
  insurance, general business, or actuarial principles sufficient to
  make the success of the association probable.
         Sec. 2214.153.  TERMS. (a) Members of the board of
  directors serve six-year staggered terms, with the terms of three
  members expiring on February 1 of each odd-numbered year.
         (b)  A person may serve on the board of directors for not more
  than three consecutive full terms, not to exceed 18 years.
         (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 Internet website.  The commissioner shall appoint the
  replacement for a director who leaves or is removed from the board
  of directors.
         Sec. 2214.154.  OFFICERS. The board of directors shall
  elect from the board's membership an executive committee consisting
  of a presiding officer, assistant presiding officer, and
  secretary-treasurer.
         Sec. 2214.155.  MEETINGS. (a)  Except for an emergency
  meeting, the association shall call and conduct its meetings in
  accordance with the plan of operation.
         (b)  Except for a closed meeting authorized by Subchapter D,
  Chapter 551, Government Code, a meeting of the board of directors or
  of the members of the association is open to the public.
         (c)  Notice of a meeting of the board of directors or the
  association must be given as provided by Chapter 551, Government
  Code.
         Sec. 2214.156.  OPEN MEETINGS AND OPEN RECORDS. (a)  Except
  as specifically provided by this chapter or another law, the board
  of directors and the association are subject to Chapters 551 and
  552, Government Code.
         (b)  A settlement agreement to which the association is a
  party is public information and is not exempted from required
  disclosure under Chapter 552, Government Code.
         (c)  Subsection (b) may not be construed to limit or
  otherwise restrict the categories of information that are public
  information under Section 552.022, Government Code.
  SUBCHAPTER E. PLAN OF OPERATION
         Sec. 2214.201.  ADOPTION OF PLAN OF OPERATION. With the
  advice of the board of directors, the commissioner by rule shall
  adopt the plan of operation to provide tornado and wildfire
  insurance in this state.
         Sec. 2214.202.  CONTENTS OF PLAN OF OPERATION. (a) The plan
  of operation must:
               (1)  provide for the efficient, economical, fair, and
  nondiscriminatory administration of the association; and
               (2)  include other provisions as considered necessary
  by the department to implement the purposes of this chapter.
         (b)  The plan of operation may provide for liability limits
  for an insured structure and for the corporeal movable property
  located in the structure.
         Sec. 2214.203.  AMENDMENTS TO PLAN OF OPERATION. (a) The
  association may present a recommendation for a change in the plan of
  operation to the department at:
               (1)  periodic hearings conducted by the department for
  that purpose; or
               (2)  hearings relating to property and casualty
  insurance rates.
         (b)  The association must present a proposed change to the
  department in writing in the manner prescribed by the commissioner.  
  A proposed change does not take effect unless adopted by the
  commissioner by rule.
         (c)  An interested person may, in accordance with Chapter
  2001, Government Code, petition the commissioner to modify the plan
  of operation.
  SUBCHAPTER F. INSURANCE COVERAGE; APPLICATION AND INSPECTION
         Sec. 2214.251.  DEFINITION OF INSURABLE INTEREST. In this
  subchapter, "insurable interest" includes any lawful and
  substantial economic interest in the safety or preservation of
  property from loss, destruction, or pecuniary damage.
         Sec. 2214.252.  APPLICATION FOR COVERAGE. (a)  A person who
  has an insurable interest in insurable property may apply to the
  association for insurance coverage provided under the plan of
  operation and an inspection of the property, subject to any rules
  established by the board of directors and approved by the
  commissioner.  The association shall make insurance available in
  accordance with the plan of operation to each applicant in this
  state whose property is insurable property but who, after diligent
  efforts, is unable to obtain property insurance through the
  voluntary market, as evidenced by one declination from an insurer
  authorized to engage in the business of, and writing, property
  insurance providing tornado and wildfire coverage in this state.
         (b)  A property and casualty agent must submit an application
  for initial insurance coverage on behalf of the applicant on forms
  prescribed by the association.  The association shall develop a
  simplified renewal process that allows for the acceptance of an
  application for renewal coverage, and payment of premiums, from a
  property and casualty agent or a person insured under this chapter.  
  An application for initial or renewal coverage must comply with the
  requirements of the plan of operation.
         Sec. 2214.253.  ISSUANCE OF COVERAGE; TERM; RENEWAL. (a)  If
  the association determines that the property for which an
  application for initial insurance coverage is made is insurable
  property, the association, on payment of the premium, shall direct
  the issuance of an insurance policy as provided by the plan of
  operation.
         (b)  A policy issued under this section is for a one-year
  term.
         (c)  A policy may be renewed annually on application for
  renewal as long as the property continues to be insurable property.
         (d)  The commissioner, after receiving a recommendation from
  the board of directors, shall approve a commission structure for
  payment of an agent who submits an application for coverage to the
  association on behalf of a person who has an insurable interest in
  insurable property.  The commission structure adopted by the
  commissioner must be fair and reasonable, taking into consideration
  the amount of work performed by an agent in submitting an
  application to the association and the prevailing commission
  structure in the private insurance market.
         Sec. 2214.254.  CANCELLATION OF CERTAIN COVERAGE. (a) An
  agent or insured may request cancellation of the insurance coverage
  by:
               (1)  returning the policy, with proof that the insured
  was notified of the return; or
               (2)  requesting the association to cancel the insurance
  coverage by a notice mailed to the insured and to any others shown
  in the policy as having an insurable interest in the property.
         (b)  On completion of cancellation under Subsection (a), the
  association shall refund the unearned premium, less any minimum
  retained premium set forth in the plan of operation, to the person,
  firm, or corporation to whom the unpaid balance is due.
         (c)  If an insured requests cancellation of the insurance
  coverage, the association shall refund the unearned premium, less
  any minimum retained premium set forth in the plan of operation,
  payable to the insured and the holder of an unpaid balance.  The
  property and casualty agent who received a commission as the result
  of the issuance of an association policy providing the canceled
  coverage shall refund the agent's commission on any unearned
  premium in the same manner.
         Sec. 2214.255.  POLICY PROVISIONS. A tornado and wildfire
  insurance policy issued by the association must comply with the
  requirements of the plan of operation.
         Sec. 2214.256.  INSPECTION REQUIREMENT. (a) To be
  considered insurable property eligible for insurance coverage from
  the association, a structure must be inspected or approved by the
  department for compliance with the plan of operation.
         (b)  The department shall issue a certificate of compliance
  for each structure that qualifies for coverage.  The certificate is
  evidence of insurability of the structure by the association.  The
  decision whether to issue a certificate of compliance for a
  structure is wholly within the discretion of the department.
         (c)  The department may enter into agreements and contracts
  as necessary to implement this section.
         (d)  The department may charge reasonable fees to cover the
  cost of implementing this section.
  SUBCHAPTER G. RATES
         Sec. 2214.301.  ASSOCIATION FILINGS. (a) The association
  must file with the department each manual of classifications,
  rules, rates, including condition charges, and each rating plan,
  and each modification of those items that the association proposes
  to use.
         (b)  A filing under this section must indicate the character
  and the extent of the coverage contemplated and must be accompanied
  by the policy and endorsement forms proposed to be used.  The forms
  may be designed specifically for use by the association without
  regard to other forms filed with, approved by, or prescribed by the
  department for use in this state.
         (c)  As soon as reasonably possible after the filing has been
  made, the commissioner in writing shall approve or disapprove the
  filing.  A filing is considered approved unless disapproved on or
  before the 30th day after the date of the filing.  If the
  commissioner disapproves a filing, the commissioner shall state in
  writing the reasons for the disapproval and the criteria the
  association is required to meet to obtain approval.
         (d)  The department shall value the loss and loss adjustment
  expense data to be used for a filing not earlier than March 31 of the
  year before the year in which the filing is to be made.
         Sec. 2214.302.  MANUAL RATE FILINGS: ANNUAL FILING. (a) Not
  later than August 15 of each year, the association shall file with
  the department a proposed manual rate for all types and classes of
  risks written by the association.
         (b)  Before approving or disapproving a filing under this
  section, the commissioner shall provide all interested persons a
  reasonable opportunity to:
               (1)  review the filing;
               (2)  obtain copies of the filing on payment of any
  legally required copying cost; and
               (3)  submit to the commissioner written comments or
  information related to the filing.
         (c)  The commissioner shall approve or disapprove the filing
  in writing not later than October 15 of the year in which the filing
  was made.  If the filing is not approved or disapproved on or before
  that date, the filing is considered approved.
         (d)  If the commissioner disapproves a filing, the
  commissioner shall state in writing the reasons for the disapproval
  and the criteria the association is required to meet to obtain
  approval.
         Sec. 2214.303.  MANUAL RATE FILINGS: AMENDED ANNUAL FILING.
  (a) Not later than the 30th day after the date the association
  receives the commissioner's written disapproval under Section
  2214.302, the association may file with the commissioner an amended
  annual filing that conforms to all criteria stated in that written
  disapproval.
         (b)  Not later than the 30th day after the date an amended
  filing made under Subsection (a) is received, the commissioner
  shall approve or disapprove the amended filing.  If the filing is
  not disapproved on or before the 30th day after the date of receipt,
  the filing is considered approved.  If the commissioner disapproves
  a filing, the commissioner shall state in writing the reasons for
  the disapproval and the criteria the association is required to
  meet to obtain approval.
         (c)  Before approving or disapproving an amended annual
  filing under this section, the commissioner shall, in the manner
  provided by Section 2214.302, provide all interested persons a
  reasonable opportunity to:
               (1)  review the amended annual filing;
               (2)  obtain copies of the amended annual filing on
  payment of any legally required copying cost; and
               (3)  submit to the commissioner written comments or
  information related to the amended annual filing.
         Sec. 2214.304.  MANUAL RATE FILINGS: ADDITIONAL SUPPORTING
  INFORMATION. (a) In conjunction with the review of a filing under
  Section 2214.302:
               (1)  the commissioner may request the association to
  provide additional supporting information relating to the filing;
  and
               (2)  any interested person may file a written request
  with the commissioner, during a period specified by the
  commissioner by rule, for additional supporting information
  relating to the filing.
         (b)  A request under this section must be reasonable and must
  be directly related to the filing.
         (c)  The commissioner shall submit to the association all
  requests for additional supporting information made under this
  section for the commissioner's use and the use of any interested
  person not later than the 21st day after the date of receipt of the
  filing.
         (d)  Unless a different period is requested by the
  association and approved by the commissioner, the association shall
  provide the information to the commissioner not later than the
  fifth day after the date the written request for additional
  supporting information is delivered to the association.
         Sec. 2214.305.  GENERAL RATE REQUIREMENTS; RATE STANDARDS.
  (a) Rates for coverage under this chapter must be made in
  accordance with the plan of operation.
         (b)  Rates must be reasonable, adequate, not unfairly
  discriminatory, and nonconfiscatory as to any class of insurer.
         (c)  For the establishment of rates and minimum premiums, the
  risks may be grouped by classification.
         (d)  A commission paid to an agent for a tornado and wildfire
  insurance policy issued by the association must comply with the
  commission structure established in the plan of operation and be
  reasonable, adequate, not unfairly discriminatory, and
  nonconfiscatory.
         (e)  The association may establish rating territories and
  may vary rates among the territories as provided by the plan of
  operation.
         Sec. 2214.306.  RATE CLASSIFICATIONS. All premiums written
  and losses paid under this chapter, as appropriate, must be
  included in applicable classifications for general ratemaking
  purposes.
  SUBCHAPTER H. LIABILITY LIMITS
         Sec. 2214.351.  MAXIMUM LIABILITY LIMITS. The maximum
  liability limits under a tornado and wildfire insurance policy
  issued by the association under this chapter are established by the
  plan of operation and may be adjusted by amendment to the plan of
  operation.
         SECTION 2.  (a)  The governor shall appoint the members of
  the board of directors of the Texas Tornado and Wildfire Insurance
  Association under Chapter 2214, Insurance Code, as added by this
  Act, effective November 1, 2019.  The initial directors shall draw
  lots to achieve staggered terms, with three of the directors
  serving two-year terms, three of the directors serving four-year
  terms, and three of the directors serving six-year terms.
         (b)  The plan of operation adopted under Chapter 2214,
  Insurance Code, as added by this Act, must provide that the Texas
  Tornado and Wildfire Insurance Association issue insurance
  policies under that chapter not later than January 1, 2020.
         (c)  The commissioner of insurance shall adopt rules
  necessary to ensure that the Texas Tornado and Wildfire Insurance
  Association issue insurance policies under Chapter 2214, Insurance
  Code, as added by this Act, not later than January 1, 2020.
         SECTION 3.  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, 2019.