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