By: Oliverson H.B. No. 2547
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the modernization of regulation of commercial property
  and casualty insurance.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 2251.002, Insurance Code, is amended to
  read as follows:
         Section 2251.002.  DEFINITIONS. In this chapter:
         (1)  "Commercial property insurance" means insurance
  coverage against loss caused by or resulting from loss, damage, or
  destruction of real or personal property provided through a
  commercial property insurance policy. The term includes any
  combination of:
         (A)  commercial fire or allied lines;
         (B)  commercial inland marine insurance;
         (C)  commercial crime coverage;
         (D)  boiler and machinery insurance other than explosion;
         (E)  glass insurance provided as part of other coverage; and
         (F)  as authorized by commissioner rule, insurance covering
  other perils or providing other coverages or other lines of first
  party property insurance.
         (1-a)  "Disallowed expenses" includes:
         (A)  administrative expenses, other than acquisition, loss
  control, and safety engineering expenses, that exceed 110 percent
  of the industry median for those expenses;
         (B)  lobbying expenses;
         (C)  advertising expenses, other than for advertising:
         (i)  directly related to the services or products provided by
  the insurer; or
         (ii)  designed and directed at loss prevention;
         (D)  amounts paid by an insurer:
         (i)  as damages in an action brought against the insurer for
  bad faith, fraud, or any matters other than payment under the
  insurance contract; or
         (ii)  as fees, fines, penalties, or exemplary damages for a
  civil or criminal violation of law;
         (E)  contributions to:
         (i)  social, religious, political, or fraternal
  organizations; or
         (ii)  organizations engaged in legislative advocacy;
         (F)  except as authorized by commissioner rule, fees and
  assessments paid to advisory organizations;
         (G)  any amount determined by the commissioner to be excess
  premiums charged by the insurer; and
         (H)  any unreasonably incurred expenses, as determined by
  the commissioner after notice and hearing.
         (2)  "Filer" means an insurer that files rates, prospective
  loss costs, or supplementary rating information under this chapter.
         (2-a)  "Highly protected commercial property" is defined as
  property that is judged to be subject to a much lower than normal
  probability of loss by virtue of low hazard occupancy or property
  type, superior construction, special fire protection equipment and
  procedures, and management commitment to loss prevention.
         (3)  "Prospective loss cost" means that portion of a rate
  that:
         (A)  does not include a provision for expenses or profit,
  other than loss adjustment expenses; and
         (B)  is based on historical aggregate losses and loss
  adjustment expenses projected by development to the ultimate value
  of those losses and expenses and projected through trending to a
  future point in time.
         (4)  "Rate" means the cost of insurance per exposure unit,
  whether expressed as a single number or as a prospective loss cost,
  adjusted to account for the treatment of expenses, profit, and
  individual insurer variation in loss experience, before applying
  individual risk variations based on loss or expense considerations.
         (5)  "Rating manual" means a publication or schedule that
  lists rules, classifications, territory codes and descriptions,
  rates, premiums, and other similar information used by an insurer
  to determine the applicable premium charged an insured.
         (6)  "Residential property insurance" means insurance
  coverage against loss to real or tangible personal property at a
  fixed location that is provided through a homeowners insurance
  policy, including a tenants insurance policy, a condominium owners
  insurance policy, or a residential fire and allied lines insurance
  policy.
         (7)  "Supplementary rating information" means any manual,
  rating schedule, plan of rules, rating rules, classification
  systems, territory codes and descriptions, rating plans, and other
  similar information used by the insurer to determine the applicable
  premium for an insured. The term includes factors and
  relativities, including increased limits factors, classification
  relativities, deductible relativities, premium discount, and other
  similar factors and rating plans such as experience, schedule, and
  retrospective rating.
         (8)  "Supporting information" means:
         (A)  the experience and judgment of the filer and the
  experience or information of other insurers or advisory
  organizations on which the filer relied;
         (B)  the interpretation of any other information on which the
  filer relied;
         (C)  a description of methods used in making a rate; and
         (D)  any other information the department receives from a
  filer as a response to a request under Section 38.001.
         SECTION 2.  Section 2251.003, Insurance Code, is amended to
  read as follows:
         Sec. 2251.003.  APPLICABILITY OF CERTAIN SUBCHAPTERS. (a)
  This subchapter and Subchapters B, C, and D apply to:
         (1)  an insurer to which Article 5.13 applies, other than the
  Texas Windstorm Insurance Association, the FAIR Plan Association,
  and the Texas Automobile Insurance Plan Association; and
         (2)  except as provided by Subsection (c), a Lloyd's plan,
  reciprocal or interinsurance exchange, and county mutual insurance
  company with respect to the lines of insurance described by
  Subsection (b).
         (b)  Except as provided by Subsection (d), this[This]
  subchapter and Subchapters B, C, and D apply to all lines of the
  following kinds of insurance written under an insurance policy or
  contract issued by an insurer authorized to engage in the business
  of insurance in this state:
         (1)  general liability insurance;
         (2)  residential and commercial property insurance,
  including farm and ranch insurance and farm and ranch owners
  insurance;
         (3)  personal and commercial casualty insurance, except as
  provided by Section 2251.004;
         (4)  medical professional liability insurance;
         (5)  fidelity, guaranty, and surety bonds other than
  criminal court appearance bonds;
         (6)  personal umbrella insurance;
         (7)  personal liability insurance;
         (8)  guaranteed auto protection (GAP) insurance;
         (9)  involuntary unemployment insurance;
         (10)  financial guaranty insurance;
         (11)  inland marine insurance;
         (12)  rain insurance;
         (13)  hail insurance on farm crops;
         (14)  personal and commercial automobile insurance;
         (15)  multi-peril insurance; and
         (16)  identity theft insurance issued under Chapter 706.
         (c)  Sections 2251.008, 2251.052, 2251.101, 2251.102,
  2251.103, 2251.104, 2251.105, and 2251.107 do not apply to a
  Lloyd's plan or a reciprocal or interinsurance exchange with
  respect to commercial property insurance, inland marine insurance,
  rain insurance, or hail insurance on farm crops.
         (d)  Except as provided by Subsection (e), Subchapter C does
  not apply to all lines of the following kinds of insurance written
  under a commercial insurance policy or contract issued by an
  insurer authorized to engage in the business of insurance in this
  state:
         (1)  surety bonds;
         (2)  fidelity bonds;
         (3)  commercial inland marine;
         (4)  boiler and machinery;
         (5)  environmental impairment or pollution liability;
         (6)  kidnap and ransom;
         (7)  political risk or expropriation;
         (8)  commercial excess liability or umbrella liability;
         (9)  directors' and officers' liability;
         (10)  fiduciary liability;
         (11)  employment practices liability;
         (12)  errors and omission and professional liability (other
  than medical professional liability);
         (13)  media liability;
         (14)  product liability, product recall, or completed
  operations;
         (15)  commercial cybersecurity, including first and third
  party commercial lines coverage for losses arising out of or
  relating to data privacy breaches, network security, computer
  viruses, and similar exposures;
         (16)  highly protected commercial property;
         (17)  commercial flood insurance (other than National Flood
  Insurance Program);
         (18)  any other commercial lines insurance coverage or risk
  that the commissioner shall, by rule, exempt from rate filing
  requirements under Subchapter C in order to promote enhanced
  competition or to more effectively use the resources of the
  department that might otherwise be used to review commercial lines
  filings; and
         (19)  any combination of only the kinds of insurance in this
  subsection.
         (e)  The commissioner may temporarily reinstate, for a
  period of no longer than one year, the requirements for rate filings
  under Subchapter C for a specific insurance coverage specified
  under Subsection (d) if, after a hearing, the commissioner makes a
  finding of fact that a reasonable degree of competition does not
  exist for that specific type of insurance coverage. Such a finding
  of fact by the commissioner must specify the relevant tests used to
  determine whether a lack of a reasonable degree of competition
  exists and the results thereof. In the absence of such specific
  findings of fact by the commissioner, a competitive market is
  presumed to exist.
         (f)  The commissioner may adopt reasonable and necessary
  rules to implement this section.
         (g)  Section 2251.101 does not apply to rates for use with an
  insured that has:
               (1)  total insured property values of $5 million or
  more;
               (2)  total annual gross revenues of $10 million or
  more; or
               (3)  a total premium of $25,000 or more for property
  insurance, $25,000 or more for general liability insurance, or
  $50,000 or more for multiperil insurance.
         SECTION 3.  Section 2251.003(d), Insurance Code, as added by
  this Act, applies only to an insurance policy delivered, issued for
  delivery, or renewed on or after September 1, 2021. A policy
  delivered, issued for delivery, or renewed before September 1,
  2021, is governed by the law as it existed immediately before the
  effective date of this Act, and that law is continued in effect for
  that purpose.
         SECTION 4.  Section 2301.002, Insurance Code, is amended to
  read as follows:
         Sec. 2301.002.  DEFINITIONS. In this subchapter:
         (1)  "Commercial property insurance" means insurance
  coverage against loss caused by or resulting from loss, damage, or
  destruction of real or personal property provided through a
  commercial property insurance policy. The term includes any
  combination of:
         (A)  commercial fire or allied lines;
         (B)  commercial inland marine insurance;
         (C)  commercial crime coverage;
         (D)  boiler and machinery insurance other than explosion;
         (E)  glass insurance provided as part of other coverage; and
         (F)  as authorized by commissioner rule, insurance covering
  other perils or providing other coverages or other lines of first
  party property insurance.
         (1-a)  "Form" means an insurance policy form or a printed
  endorsement form.
         (1-b)  "Highly protected commercial property" is defined as
  property that is judged to be subject to a much lower than normal
  probability of loss by virtue of low hazard occupancy or property
  type, superior construction, special fire protection equipment and
  procedures, and management commitment to loss prevention.
         (2)  "Residential property insurance" means insurance
  coverage against loss to real or tangible personal property at a
  fixed location that is provided through a homeowners insurance
  policy, including a tenants insurance policy, a condominium owners
  insurance policy, or a residential fire and allied lines insurance
  policy.
         (3)  "Supporting information" means any information required
  by the department to be filed.
         SECTION 5.  Section 2301.003, Insurance Code, is amended to
  read as follows:
         Sec. 2301.003.  APPLICABILITY OF SUBCHAPTER. (a) This
  subchapter applies to:
         (1)  an insurer to which Article 5.13 applies, other than the
  Texas Windstorm Insurance Association, the FAIR Plan Association,
  and the Texas Automobile Insurance Plan Association; and
         (2)  except as provided by Subsections (c) and (d), a Lloyd's
  plan, reciprocal or interinsurance exchange, and county mutual
  insurance company with respect to the lines of insurance described
  by Subsection (b).
         (b)  Except as provided in Subsection (e), this[This]
  subchapter applies to all lines of the following kinds of insurance
  written under an insurance policy or contract issued by an insurer
  authorized to engage in the business of insurance in this state:
         (1)  general liability insurance;
         (2)  residential and commercial property insurance,
  including farm and ranch insurance and farm and ranch owners
  insurance;
         (3)  personal and commercial casualty insurance, except as
  provided by Section 2301.005;
         (4)  medical professional liability insurance;
         (5)  fidelity, guaranty, and surety bonds other than
  criminal court appearance bonds;
         (6)  personal umbrella insurance;
         (7)  personal liability insurance;
         (8)  guaranteed auto protection (GAP) insurance;
         (9)  involuntary unemployment insurance;
         (10)  financial guaranty insurance;
         (11)  inland marine insurance;
         (12)  rain insurance;
         (13)  hail insurance on farm crops;
         (14)  personal and commercial automobile insurance;
         (15)  multi-peril insurance; and
         (16)  identity theft insurance issued under Chapter 706.
         (c)  Section 2301.009 does not apply to a Lloyd's plan or a
  reciprocal or interinsurance exchange with respect to commercial
  property insurance.
         (d)  This subchapter does not apply to a Lloyd's plan or
  reciprocal or interinsurance exchange with respect to inland marine
  insurance, rain insurance, or hail insurance on farm crops.
         (e)  Except as provided by Subsection (f), Sections
  2301.006, 2301.007(a) and (b), and 2301.008 do not apply to all
  lines of the following kinds of insurance written under a
  commercial insurance policy or contract issued by an insurer
  authorized to engage in the business of insurance in this state:
         (1)  surety bonds;
         (2)  fidelity bonds;
         (3)  commercial inland marine;
         (4)  boiler and machinery;
         (5)  environmental impairment or pollution liability;
         (6)  kidnap and ransom;
         (7)  political risk or expropriation;
         (8)  commercial excess liability or umbrella liability;
         (9)  directors' and officers' liability;
         (10)  fiduciary liability;
         (11)  employment practices liability;
         (12)  errors and omission and professional liability (other
  than medical professional liability);
         (13)  media liability;
         (14)  product liability, product recall, or completed
  operations;
         (15)  cybersecurity, including first and third party
  commercial lines coverage for losses arising out of or relating to
  data privacy breaches, network security, computer viruses, and
  similar exposures;
         (16)  highly protected commercial property;
         (17)  commercial flood insurance (other than National Flood
  Insurance Program);
         (18)  any other commercial lines insurance coverage or risk
  that the commissioner shall, by rule, exempt from policy form
  filing requirements under this subchapter in order to promote
  enhanced competition or to more effectively use the resources of
  the department that might otherwise be used to review commercial
  lines filings; and
         (19)  any combination of only the kinds of insurance in this
  subsection.
         (f)  The commissioner may temporarily reinstate, for a
  period of no longer than one year, the requirements of sections
  2301.006, 2301.007(a) and (b), and 2301.008 for a specific
  insurance coverage specified under Subsection (e) if, after a
  hearing, the commissioner makes a finding of fact that a reasonable
  degree of competition does not exist for that specific type of
  insurance coverage. Such a finding of fact by the commissioner must
  specify the relevant tests used to determine whether a lack of a
  reasonable degree of competition exists and the results thereof.
  In the absence of such specific findings of fact by the
  commissioner, a competitive market is presumed to exist.
         (g)  The commissioner may adopt reasonable and necessary
  rules to implement this section.
         SECTION 6.  Section 981.004, Insurance Code, is amended to
  read as follows:
         Sec. 981.004.  SURPLUS LINES INSURANCE AUTHORIZED. (a) An
  eligible surplus lines insurer may provide surplus lines insurance
  only if:
               (1)  the full amount of required insurance cannot be
  obtained, after a diligent effort, from an insurer authorized to
  write and actually writing that kind and class of insurance in this
  state;
               (2)  the insurance is placed through a surplus lines
  agent; and
               (3)  the insurer meets the eligibility requirements of
  Subchapter B or B-1 as of the inception date and annual anniversary
  date of each insurance contract, cover note, or other confirmation
  of insurance.
         (b)  An eligible surplus lines insurer may provide surplus
  lines insurance only in the amount that exceeds the amount of
  insurance obtainable from authorized insurers.
         (c)  Subsection (a)(1) does not apply to insurance procured
  for an exempt commercial purchaser if:
               (1)  the agent procuring or placing the insurance
  discloses to the exempt commercial purchaser that:
                     (A)  comparable insurance may be available from
  the admitted market that is subject to more regulatory oversight
  than the surplus lines market; and
                     (B)  a policy purchased in the admitted market may
  provide greater protection than the surplus lines insurance policy;
  and
               (2)  after receiving the notice described by
  Subdivision (1), the exempt commercial purchaser requests in
  writing that the agent procure the insurance from or place the
  insurance with an eligible surplus lines insurer.
         (d)  Subsection (a)(1) does not apply to insurance procured
  for an industrial insured if:
               (1)  the agent procuring or placing the insurance
  discloses to the industrial insured that:
                     (A)  comparable insurance may be available from
  the admitted market that is subject to more regulatory oversight
  than the surplus lines market; and
                     (B)  a policy purchased in the admitted market may
  provide greater protection than the surplus lines insurance policy;
               (2)  the surplus lines company offering the coverage
  has a financial strength rating of A- or better from the A. M. Best
  Company; and
               (3)  after receiving the notice described by
  Subdivision (1), the industrial insured requests in writing that
  the agent procure the insurance from or place the insurance with an
  eligible surplus lines insurer.
         (e)  Notwithstanding Subsection (a)(1), the availability of
  windstorm and hail insurance from the Texas Windstorm Insurance
  Association does not preclude an eligible surplus lines insurer
  from providing windstorm and hail insurance under Subsection (a) or
  limiting the amount of insurance that may be provided under
  Subsection (b).
         (f)  Except with respect to any line of insurance and during
  any period of time for which the commissioner has temporarily
  reinstated the requirements for rate and form filings under Sec.
  2251.003(e) and Sec. 2301.003(f), Subsection (a)(1) and Subsection
  (b) do not apply to insurance procured in all lines of the kinds of
  insurance described in Section 2251.003(d) and 2301.003(e) and
  provided by an eligible surplus lines insurer.
         SECTION 7.  This Act takes effect September 1, 2021.