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A BILL TO BE ENTITLED
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AN ACT
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relating to the Texas Windstorm Insurance Association. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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ARTICLE 1. ADMINISTRATION AND OPERATION OF TEXAS WINDSTORM |
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INSURANCE ASSOCIATION |
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SECTION 1.01. Section 2210.014, Insurance Code, is amended |
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by adding Subsection (d) to read as follows: |
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(d) The association is not subject to any insurance premium |
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tax or insurance maintenance fee or tax. |
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SECTION 1.02. Subchapter A, Chapter 2210, Insurance Code, |
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is amended by adding Section 2210.016 to read as follows: |
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Sec. 2210.016. LEGISLATIVE LOBBYING. (a) The association |
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may not use any money under its control to attempt to influence the |
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passage or defeat of a legislative measure. |
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(b) An association employee or member of the board of |
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directors who violates Subsection (a) is subject to: |
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(1) immediate termination; and |
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(2) a fine of $10,000 to be deposited in the |
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catastrophe reserve trust fund. |
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(c) This section does not prohibit an association employee |
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or member of the board of directors from using money under the |
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association's control to provide public information or to provide |
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information responsive to a request for public information. |
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SECTION 1.03. Section 2210.102, Insurance Code, is amended |
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by amending Subsections (a), (c), (c-1), (d), and (g) and adding |
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Subsection (d-1) to read as follows: |
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(a) The board of directors is composed of eleven [nine] |
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members appointed by the commissioner in accordance with this |
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section. |
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(c) Five [Three] members must, as of the date of the |
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appointment, reside in the first tier coastal counties. Each of |
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the following regions must, to the extent possible, be represented |
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by a member residing in the region and appointed under this |
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subsection: |
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(1) the region consisting of Cameron, Kenedy, Kleberg, |
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and Willacy Counties; |
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(2) the region consisting of Aransas, Calhoun, Nueces, |
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Refugio, and San Patricio Counties; and |
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(3) the region consisting of Brazoria, Chambers, |
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Galveston, Jefferson, and Matagorda Counties and any part of Harris |
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County designated as a catastrophe area under Section 2210.005. |
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(c-1) Two [One] of the members appointed under Subsection |
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(c) must be [a] property and casualty agents [agent] who are [is] |
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licensed under this code and are [is] not [a] captive agents |
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[agent]. |
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(d) Three members must reside in an area of this state that |
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is located outside the first tier coastal counties [more than 100 |
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miles from the Texas coastline]. |
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(d-1) One of the members appointed under Subsection (d) must |
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be the public counsel of the office of public insurance counsel or |
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the counsel's designee. |
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(g) Members appointed to the board of directors under |
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Subsections (c) and (d), other than a [the] member appointed under |
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Subsection (c-1), must represent the general public in the regions |
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described by those subsections. A person may not be appointed to |
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represent the general public under Subsection (c) or (d) if the |
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person or the person's spouse: |
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(1) is employed by or participates in the management |
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of a business entity or other organization: |
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(A) operating in the property and casualty |
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insurance industry in this state; |
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(B) receiving money from the association, other |
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than insurance claim payments; or |
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(C) receiving money from association |
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policyholders with respect to the policyholders' claims; |
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(2) owns or controls, directly or indirectly, more |
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than a 10 percent interest in a business entity or other |
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organization: |
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(A) operating in the property and casualty |
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insurance industry in this state; |
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(B) receiving money from the association, other |
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than insurance claim payments; or |
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(C) receiving money from association |
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policyholders with respect to the policyholders' claims; or |
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(3) uses or receives a substantial amount of tangible |
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goods, services, or money from the association, other than: |
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(A) insurance claim payments; or |
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(B) compensation or reimbursement authorized by |
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law for the board members' membership, attendance, or expenses. |
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SECTION 1.04. Section 2210.103(a), Insurance Code, is |
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amended to read as follows: |
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(a) Members of the board of directors serve three-year |
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staggered terms, with the terms of three or four members expiring on |
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the third Tuesday of March of each year. |
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SECTION 1.05. Section 2210.105(d), Insurance Code, is |
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amended to read as follows: |
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(d) Except for an emergency meeting, a meeting of the board |
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of directors shall be held at a location in a first tier coastal |
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county or a second tier coastal county as determined by the board of |
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directors. |
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SECTION 1.06. Subchapter E, Chapter 2210, Insurance Code, |
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is amended by adding Section 2210.211 to read as follows: |
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Sec. 2210.211. LIMITATIONS ON CERTAIN ADJUSTMENTS. (a) The |
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association may not automatically adjust the amount of coverage to |
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be purchased by a policyholder. |
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(b) The association may not adjust premiums, fees, or any |
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other costs to policyholders for inflation without a vote by the |
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board of directors. |
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SECTION 1.07. Section 2210.352(a), Insurance Code, is |
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amended to read as follows: |
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(a) Not later than September [August] 15 of each year, the |
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association shall file with the department a proposed manual rate |
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for all types and classes of risks written by the association. |
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SECTION 1.08. Subchapter J, Chapter 2210, Insurance Code, |
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is amended by adding Section 2210.4531 to read as follows: |
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Sec. 2210.4531. DETERMINATION OF PROBABLE MAXIMUM LOSS. |
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(a) The association shall file with the department a proposed |
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probable maximum loss, subject to Section 2210.453. |
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(b) In determining the probable maximum loss, the |
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association: |
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(1) may not consider the cost of providing loss |
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adjustments; |
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(2) shall, to the extent possible, contract with any |
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disinterested third parties necessary to execute any catastrophe |
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models that were executed in the preceding storm season; |
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(3) shall, if the association is unable to contract |
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for the execution of a catastrophe model described by Subdivision |
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(2), contract with any disinterested third party necessary to |
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execute a catastrophe model that is substantially similar to the |
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model for which the association is unable to contract under |
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Subdivision (2); |
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(4) may contract with any disinterested third parties |
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to execute catastrophe models in addition to the models required |
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under Subdivisions (2) and (3); |
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(5) shall provide to a disinterested third party |
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executing a catastrophe model any information necessary to comply |
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with this subsection; |
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(6) may not use a combination of catastrophe models to |
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determine the probable maximum loss; and |
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(7) may use only the catastrophe model that produces |
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the lowest probable maximum loss. |
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(c) The association shall make any information produced in |
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compliance with Subsection (b) publicly available on the |
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association's Internet website. |
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(d) The association may only use a probable maximum loss |
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that is approved by the commissioner. The commissioner may reject a |
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probable maximum loss filed with the department by the association |
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and set a probable maximum loss at any amount determined by the |
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commissioner. |
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(e) The amount of loss adjustment expense, as adopted by the |
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board of directors for a catastrophe year and used for the |
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association's rate indication for purposes of filing a rate under |
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this chapter, must be considered above the probable maximum loss. |
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SECTION 1.09. Section 542A.002(b), Insurance Code, is |
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amended to read as follows: |
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(b) This chapter does not apply to an action against the |
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Texas Windstorm Insurance Association [or to an action relating to |
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or arising from a policy ceded to an insurer by the Texas Windstorm |
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Insurance Association under Subchapter O, Chapter 2210. This |
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chapter applies to an action that relates to or arises from a policy |
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renewed under Section 2210.703]. |
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SECTION 1.10. The following provisions of the Insurance |
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Code are repealed: |
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(1) Section 2210.102(f); and |
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(2) Subchapter O, Chapter 2210. |
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SECTION 1.11. (a) The commissioner of insurance shall |
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appoint two additional members to the board of directors of the |
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Texas Windstorm Insurance Association as necessary under Sections |
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2210.102(c) and (c-1), Insurance Code, as amended by this article, |
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not later than December 1, 2023. |
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(b) Notwithstanding Section 2210.103, Insurance Code, as |
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amended by this article, the initial term of one of the board |
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members appointed under Subsection (a) of this section expires on |
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the third Tuesday of March 2026, and the initial term of one of the |
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board members appointed under Subsection (a) of this section |
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expires on the third Tuesday of March 2027. |
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(c) Notwithstanding Section 2210.102(d-1), Insurance Code, |
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as added by this article, a member of the board of directors serving |
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under Section 2210.102(d), Insurance Code, is not required to be |
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the public insurance counsel or the public insurance counsel's |
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designee until the first vacancy under Section 2210.102(d) that |
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occurs on or after the effective date of this article. |
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SECTION 1.12. This article takes effect immediately if this |
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Act receives a vote of two-thirds of all the members elected to each |
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house, as provided by Section 39, Article III, Texas Constitution. |
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If this Act does not receive the vote necessary for immediate |
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effect, this article takes effect September 1, 2023. |
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ARTICLE 2. FUNDING OF INSURED LOSSES AND OPERATING EXPENSES OF |
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TEXAS WINDSTORM INSURANCE ASSOCIATION |
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SECTION 2.01. (a) In this section, "association" means the |
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Texas Windstorm Insurance Association. |
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(b) The legislature finds that the use of public securities |
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would not be an efficient or viable long-term method to fund losses |
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of the association in order for the association to continue to |
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provide windstorm and hail insurance after a catastrophic event. |
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Subchapter B-2, Chapter 2210, Insurance Code, as added by this Act, |
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is intended to replace Subchapter B-1, Chapter 2210, Insurance |
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Code, to provide for funding of excess losses and operating |
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expenses of the association incurred after December 31, 2023. |
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(c) The legislature finds that: |
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(1) previous experience has shown that the expense to |
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the association of issuing public securities, and the interest |
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rates for those securities, would be significant and can impose |
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significant long-term expense obligations on coastal property and |
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casualty risks that may be avoided if the legislature provides for |
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financing or investment from available state money to the |
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association before or after a catastrophic event; |
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(2) the financing or investment described by |
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Subdivision (1) of this subsection would be a more efficient way to |
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provide funding necessary for the association to pay losses after a |
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catastrophic event; and |
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(3) a loan or other investment from available state |
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money to the association of not more than $500 million before a |
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catastrophic event and not more than $1 billion after a |
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catastrophic event would: |
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(A) replace the funding levels currently |
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provided by issuing public securities; |
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(B) be consistent with sound insurance solvency |
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standards; |
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(C) provide a more viable method for the |
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association to have money for losses after a catastrophic event |
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than the issuance of public securities; and |
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(D) provide a secured investment for the state |
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that would: |
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(i) yield interest income for the state on |
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state money; and |
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(ii) be adequately secured for repayment |
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through statewide catastrophe surcharges on certain insurance |
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policies in this state. |
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(d) The legislature finds that authorizing catastrophe |
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surcharges is a viable method to assure repayment of loans or |
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investments of state money after a hurricane and to ensure that the |
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association can continue to provide windstorm and hail insurance in |
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the coastal areas of this state after a catastrophic event to |
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maintain the association's viability for the benefit of the public |
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and in furtherance of a public purpose. |
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SECTION 2.02. The heading to Subchapter B-1, Chapter 2210, |
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Insurance Code, is amended to read as follows: |
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SUBCHAPTER B-1. PAYMENT OF LOSSES INCURRED BEFORE JANUARY 1, 2024 |
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SECTION 2.03. Subchapter B-1, Chapter 2210, Insurance Code, |
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is amended by adding Section 2210.070 to read as follows: |
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Sec. 2210.070. APPLICABILITY OF SUBCHAPTER. (a) This |
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subchapter applies only to the payment of losses and operating |
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expenses of the association for a catastrophe year that occurs |
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before January 1, 2024, and results in excess losses and operating |
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expenses incurred by the association before January 1, 2024. |
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(b) Payment of excess losses and operating expenses of the |
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association incurred after December 31, 2023, shall be paid as |
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provided by Subchapter B-2. |
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SECTION 2.04. Section 2210.071(a), Insurance Code, is |
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amended to read as follows: |
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(a) If, in a catastrophe year before January 1, 2024, an |
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occurrence or series of occurrences in a catastrophe area results |
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in insured losses and operating expenses of the association in |
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excess of premium and other revenue of the association, the excess |
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losses and operating expenses shall be paid as provided by this |
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subchapter. |
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SECTION 2.05. Section 2210.0715(b), Insurance Code, is |
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amended to read as follows: |
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(b) Proceeds of public securities issued, a financing |
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arrangement entered into, or assessments made before January 1, |
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2024, or as a result of any occurrence or series of occurrences in a |
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catastrophe year that occurs before January 1, 2024, and results in |
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insured losses before that date may not be included in reserves |
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available for a subsequent catastrophe year for purposes of this |
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section or Section 2210.082 unless approved by the commissioner. |
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SECTION 2.06. The heading to Section 2210.075, Insurance |
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Code, is amended to read as follows: |
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Sec. 2210.075. REINSURANCE BY MEMBERS. |
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SECTION 2.07. Subchapter B-1, Chapter 2210, Insurance Code, |
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is amended by adding Section 2210.076 to read as follows: |
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Sec. 2210.076. PAYMENT FROM STATE-FUNDED FINANCING |
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ARRANGEMENTS. (a) Notwithstanding the provisions of this |
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subchapter to the contrary, the association may pay losses the |
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association would otherwise pay as provided by Section 2210.072, |
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2210.073, or 2210.0741 by borrowing from, or entering into other |
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financing arrangements with, this state as provided by Subchapter |
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M-1 and Section 404.0242, Government Code. |
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(b) Subchapter M-2 applies to the financing of losses under |
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this section to the extent necessary to secure and repay a debt |
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obligation to the state under a financing arrangement entered into |
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with this state under this section. |
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(c) A financing arrangement described by Subsection (a) may |
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also be used for a purpose described by Section 2210.072(d) in the |
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same manner as a financing arrangement with a market source. |
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SECTION 2.08. Chapter 2210, Insurance Code, is amended by |
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adding Subchapter B-2 to read as follows: |
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SUBCHAPTER B-2. PAYMENT OF EXCESS LOSSES AND OPERATING EXPENSES |
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Sec. 2210.080. APPLICABILITY OF SUBCHAPTER. (a) This |
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subchapter applies only to the payment of losses and operating |
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expenses of the association for a catastrophe year that occurs |
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after December 31, 2023, and results in excess losses and operating |
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expenses incurred by the association after December 31, 2023. |
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(b) This section expires September 1, 2025. |
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Sec. 2210.081. PAYMENT OF EXCESS LOSSES. (a) If, in a |
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catastrophe year, an occurrence or series of occurrences in a |
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catastrophe area results in insured losses and operating expenses |
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of the association in excess of premium and other revenue of the |
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association, the excess losses and operating expenses shall be paid |
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as provided by this subchapter. |
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(b) The association may not pay insured losses and operating |
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expenses resulting from an occurrence or series of occurrences in a |
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catastrophe year with premium and other revenue earned in a |
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subsequent year. |
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Sec. 2210.082. PAYMENT FROM RESERVES AND TRUST FUND; |
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STATE-FUNDED FINANCING ARRANGEMENTS. (a) The association shall |
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pay insured losses and operating expenses resulting from an |
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occurrence or series of occurrences in a catastrophe year in excess |
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of premium and other revenue of the association for that |
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catastrophe year from reserves of the association available before |
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or accrued during that catastrophe year and amounts in the |
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catastrophe reserve trust fund available before or accrued during |
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that catastrophe year. |
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(b) For insured losses and operating expenses for a |
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catastrophe year not paid under Subsection (a), the association |
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shall arrange for financing of not more than $1 billion through one |
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or more financing arrangements entered into with the state as |
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provided by Subchapter M-1 and Section 404.0242, Government Code. |
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Sec. 2210.083. PAYMENT FROM MEMBER ASSESSMENTS. (a) |
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Insured losses and operating expenses for a catastrophe year not |
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paid under Section 2210.082 shall be paid as provided by this |
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section from member assessments not to exceed $1 billion for that |
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catastrophe year. |
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(b) The board of directors shall notify each association |
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member of the amount of the member's assessment under this section. |
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The proportion of the insured losses and operating expenses |
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allocable to each insurer under this section shall be determined in |
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the manner used to determine each insurer's participation in the |
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association for the year under Section 2210.052. |
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(c) An association member may not recoup an assessment paid |
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under this section through a premium surcharge or tax credit. |
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Sec. 2210.084. REINSURANCE BY MEMBERS FOR MEMBER |
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ASSESSMENTS. (a) Before any occurrence or series of occurrences, |
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an association member may purchase reinsurance to cover an |
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assessment for which the member would otherwise be liable under |
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this subchapter. |
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(b) An association member must notify the board of |
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directors, in the manner prescribed by the association, whether the |
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member will be purchasing reinsurance. If the member does not |
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purchase reinsurance under this section, the member remains liable |
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for any assessment imposed under this subchapter. |
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SECTION 2.09. Section 2210.452(b), Insurance Code, is |
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amended to read as follows: |
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(b) All money, including investment income, deposited in |
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the trust fund constitutes state funds until disbursed as provided |
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by this chapter and commissioner rules. The comptroller shall hold |
|
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the money outside the state treasury on behalf of, and with legal |
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title in, the department on behalf of the association. The |
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department shall keep and maintain the trust fund in accordance |
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with this chapter and commissioner rules. The comptroller, as |
|
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custodian of the trust fund, shall administer the trust fund |
|
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strictly and solely as provided by this chapter and commissioner |
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rules. The association may include the amounts held in the |
|
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catastrophe reserve trust fund as an admitted asset in the |
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financial statements of the association. |
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SECTION 2.10. Section 2210.4521(a), Insurance Code, is |
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amended to read as follows: |
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(a) The comptroller shall invest in accordance with the |
|
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investment standard described by Section 404.024(j), Government |
|
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Code, the portion of the trust fund balance that exceeds the amount |
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of the sufficient balance determined under Subsection (b). The |
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comptroller's investment of that portion of the balance is not |
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subject to any other limitation or other requirement provided by |
|
|
Section 404.024, Government Code. The Texas Treasury Safekeeping |
|
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Trust Company and board of directors may recommend investments to |
|
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protect the trust fund and create investment income. |
|
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SECTION 2.11. Sections 2210.453(d) and (e), Insurance Code, |
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|
are amended to read as follows: |
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(d) The association may obtain reinsurance at any level |
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including excess of loss, quota share, and other forms of |
|
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reinsurance to protect the solvency and viability of the |
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association. The commissioner may consult with the board of |
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|
directors regarding methods to protect the solvency and continued |
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|
viability of the association, including by protecting the minimum |
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balance, acquiring reinsurance, or by other means [The cost of the |
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reinsurance purchased or alternative financing mechanisms used |
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under this section in excess of the minimum funding level required |
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by Subsection (b) shall be paid by assessments as provided by this |
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|
subsection. The association, with the approval of the |
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commissioner, shall notify each member of the association of the |
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|
amount of the member's assessment under this subsection. The |
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proportion of the cost to each insurer under this subsection shall |
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|
be determined in the manner used to determine each insurer's |
|
|
participation in the association for the year under Section |
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2210.052]. |
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|
(e) The commissioner may adopt a method or approve the |
|
|
association's method of determining the probability of one in 100 |
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for association risks. The commissioner shall provide any adopted |
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or approved method to the association on or before February 1 of |
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|
each year [A member of the association may not recoup an assessment |
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paid under Subsection (d) through a premium surcharge or tax |
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|
credit]. |
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|
SECTION 2.12. Section 2210.601, Insurance Code, is amended |
|
|
to read as follows: |
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|
Sec. 2210.601. FINDINGS [PURPOSE]. The legislature finds |
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|
that for losses incurred before January 1, 2024, authorizing the |
|
|
association to enter into financing arrangements with this state as |
|
|
provided by Section 2210.076 [issuance of public securities] to |
|
|
provide a method to raise funds to provide windstorm and hail |
|
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insurance through the association in certain designated portions of |
|
|
the state is for the benefit of the public and in furtherance of a |
|
|
public purpose. |
|
|
SECTION 2.13. Subchapter M, Chapter 2210, Insurance Code, |
|
|
is amended by adding Section 2210.6015 to read as follows: |
|
|
Sec. 2210.6015. APPLICABILITY OF SUBCHAPTER. To provide |
|
|
for a reasonable transition, the association may issue public |
|
|
securities under this subchapter or enter into financing |
|
|
arrangements with this state as provided by Section 2210.076 if the |
|
|
association needs to provide funds for excess losses and operating |
|
|
expenses incurred by the association before January 1, 2024, for a |
|
|
catastrophe year occurring before January 1, 2024. After December |
|
|
31, 2023, the association may not issue public securities under |
|
|
this subchapter except to fund excess losses and operating expenses |
|
|
incurred before January 1, 2024. |
|
|
SECTION 2.14. Chapter 2210, Insurance Code, is amended by |
|
|
adding Subchapters M-1 and M-2 to read as follows: |
|
|
SUBCHAPTER M-1. STATE-FUNDED CATASTROPHE FINANCING ARRANGEMENTS |
|
|
Sec. 2210.631. STATE-FUNDED CATASTROPHE FINANCING |
|
|
ARRANGEMENTS. The legislature has determined that providing |
|
|
catastrophe funding to the association by permitting the |
|
|
association to enter into a financing arrangement with this state |
|
|
is an acceptable use of state money and provides an efficient method |
|
|
for the association to pay losses following a catastrophic event. |
|
|
Sec. 2210.632. PROCEEDS OF CATASTROPHE FINANCING |
|
|
ARRANGEMENT. The proceeds of a catastrophe financing arrangement |
|
|
with this state entered into under this subchapter before a |
|
|
catastrophic event shall be deposited in the catastrophe reserve |
|
|
trust fund. |
|
|
Sec. 2210.633. CATASTROPHE FINANCING ARRANGEMENT |
|
|
AUTHORIZED; LIMITS. (a) The association may enter into a financing |
|
|
arrangement with this state as provided by Section 404.0242, |
|
|
Government Code: |
|
|
(1) before a catastrophic event, for not more than |
|
|
$500 million; and |
|
|
(2) after a catastrophic event that depletes the |
|
|
catastrophe reserve fund, for not more than $1 billion. |
|
|
(b) The amount available under Subsection (a)(2) is reduced |
|
|
by the amount of any outstanding pre-event or post-event financing |
|
|
obtained by the association under this section. |
|
|
SUBCHAPTER M-2. CATASTROPHE SURCHARGE |
|
|
Sec. 2210.641. DEFINITION. In this subchapter, |
|
|
"catastrophic event" means an occurrence or a series of occurrences |
|
|
that: |
|
|
(1) occurs in a catastrophe area during a calendar |
|
|
year; and |
|
|
(2) results in insured losses and operating expenses |
|
|
of the association in excess of premium and other revenue of the |
|
|
association. |
|
|
Sec. 2210.642. APPLICABILITY OF SUBCHAPTER. (a) |
|
|
Notwithstanding Section 2210.006, this subchapter applies to an |
|
|
insurer that is: |
|
|
(1) an insurer authorized to engage in the business of |
|
|
insurance in this state that is required to be a member of the |
|
|
association, including a farm mutual insurance company that is a |
|
|
fronting insurer as defined by Section 221.001(c); |
|
|
(2) a farm mutual insurance company that is not a |
|
|
fronting insurer as defined by Section 221.001(c) only for purposes |
|
|
of the collection of surcharges authorized by this subchapter; |
|
|
(3) an unaffiliated eligible surplus lines insurer |
|
|
writing the lines of business subject to a premium surcharge under |
|
|
this subchapter; |
|
|
(4) the association; and |
|
|
(5) the FAIR Plan Association. |
|
|
(b) A premium surcharge under this subchapter applies to: |
|
|
(1) a policy written under the following lines of |
|
|
insurance: |
|
|
(A) fire and allied lines; |
|
|
(B) farm and ranch owners; and |
|
|
(C) residential property insurance; and |
|
|
(2) the property insurance portion of a commercial |
|
|
multiple peril insurance policy. |
|
|
Sec. 2210.6425. CONSTRUCTION OF SUBCHAPTER. (a) This |
|
|
subchapter may not be construed to require an insurer to be an |
|
|
association member if the insurer is not otherwise required to be a |
|
|
member under Section 2210.052. |
|
|
(b) A farm mutual insurance company that is not a fronting |
|
|
insurer as defined by Section 221.001(c) is not a member of the |
|
|
association as a result of the company's collection of surcharges |
|
|
authorized by this subchapter or for any other reason. |
|
|
Sec. 2210.643. ANNUAL FINANCIAL REPORT BY COMMISSIONER. |
|
|
The commissioner shall determine the amount available in the |
|
|
catastrophe reserve trust fund as of December 31 of each year and |
|
|
provide a written report to the governor, lieutenant governor, and |
|
|
speaker of the house of representatives that includes: |
|
|
(1) the amount available in the catastrophe reserve |
|
|
trust fund; and |
|
|
(2) information regarding the current financial |
|
|
condition of the association. |
|
|
Sec. 2210.6435. CATASTROPHE SURCHARGES. (a) The |
|
|
commissioner, in consultation with the board of directors, may |
|
|
order a catastrophe surcharge as provided by this subchapter only |
|
|
if: |
|
|
(1) before a catastrophic event, the association |
|
|
enters into a financing arrangement with this state under |
|
|
Subchapter M-1 that is the basis for the surcharge; or |
|
|
(2) after a catastrophic event: |
|
|
(A) the commissioner determines that the |
|
|
association has depleted its reserves, other money, and the |
|
|
catastrophe reserve trust fund; and |
|
|
(B) the association enters into a financing |
|
|
arrangement with this state under Subchapter M-1 that is the basis |
|
|
for the surcharge. |
|
|
(b) The commissioner, in consultation with the board of |
|
|
directors, shall set the catastrophe surcharge as a percentage of |
|
|
premium to be collected by each insurer to which this subchapter |
|
|
applies. |
|
|
(c) The total amount authorized to be collected under this |
|
|
section for any catastrophe surcharge may not exceed the amount |
|
|
needed to repay the debt obligation to the state under the financing |
|
|
arrangement entered into with this state under Subchapter M-1 that |
|
|
is the basis for the surcharge. |
|
|
(d) The catastrophe surcharge percentage must be set in an |
|
|
amount sufficient to repay the debt obligation to the state under |
|
|
the financing arrangement entered into with this state under |
|
|
Subchapter M-1 that is the basis for the surcharge. The |
|
|
commissioner may set the surcharge as a percentage of premium to |
|
|
collect the needed aggregate amount over a period of time not to |
|
|
exceed three years. |
|
|
(e) A catastrophe surcharge authorized under this section |
|
|
shall be assessed by insurers on all policyholders of policies that |
|
|
are subject to this subchapter. |
|
|
(f) A catastrophe surcharge under this subchapter is a |
|
|
separate charge in addition to the premiums collected and is not |
|
|
subject to premium tax or commissions. |
|
|
(g) Failure by a policyholder to pay a catastrophe surcharge |
|
|
constitutes failure to pay premium for purposes of policy |
|
|
cancellation. |
|
|
(h) A catastrophe surcharge is not refundable if the policy |
|
|
is canceled or terminated. |
|
|
Sec. 2210.644. CATASTROPHE SURCHARGE PROCEEDS. The |
|
|
proceeds of a catastrophe surcharge authorized under this |
|
|
subchapter shall be deposited into the catastrophe reserve trust |
|
|
fund or an account designated by the comptroller for purposes of |
|
|
repayment of the association's debt obligation to the state under |
|
|
the financing arrangement that is the basis for the surcharge. |
|
|
Sec. 2210.6445. DISCLOSURE OF SURCHARGE. Each policy that |
|
|
is assessed a surcharge under this subchapter shall contain the |
|
|
following prominent disclosure in the documents attached to the |
|
|
policy: |
|
|
"A CATASTROPHE SURCHARGE HAS BEEN INCLUDED ON YOUR POLICY. |
|
|
THIS SURCHARGE WILL BE USED TO REPAY STATE MONEY USED BY THE TEXAS |
|
|
WINDSTORM INSURANCE ASSOCIATION TO PAY FOR LOSSES AFTER A |
|
|
CATASTROPHIC EVENT, INCLUDING A HURRICANE. THE SURCHARGE IS NOT |
|
|
REFUNDABLE IF YOU CANCEL OR TERMINATE THIS POLICY." |
|
|
Sec. 2210.645. EXEMPTION FROM TAXATION. A surcharge |
|
|
collected under this subchapter is exempt from taxation by this |
|
|
state or a municipality or other political subdivision of this |
|
|
state. |
|
|
Sec. 2210.6455. LIMITATION OF PERSONAL LIABILITY. The |
|
|
association members, the insurers required to collect a surcharge |
|
|
under this subchapter, members of the board of directors, |
|
|
association employees, the commissioner, and department employees |
|
|
are not personally liable as a result of exercising the rights and |
|
|
responsibilities granted under this subchapter. |
|
|
Sec. 2210.646. EXEMPTION FROM SURCHARGE. An insurer may |
|
|
not collect a surcharge authorized under this subchapter on any |
|
|
policy issued to this state, an agency of this state, or a political |
|
|
subdivision of this state. |
|
|
SECTION 2.15. Subchapter C, Chapter 404, Government Code, |
|
|
is amended by adding Section 404.0242 to read as follows: |
|
|
Sec. 404.0242. INVESTMENT IN WINDSTORM CATASTROPHE |
|
|
FINANCING ARRANGEMENTS. (a) The comptroller shall invest state |
|
|
money to provide financing for losses of the Texas Windstorm |
|
|
Insurance Association in accordance with this section and Chapter |
|
|
2210, Insurance Code. |
|
|
(b) For purposes of this section, the comptroller may enter |
|
|
into an appropriate financing arrangement with the Texas Windstorm |
|
|
Insurance Association to provide the association up to $500 million |
|
|
in funding before a catastrophic event and up to $1 billion in |
|
|
funding after a catastrophic event to fund the losses of the |
|
|
association arising from the catastrophic event. Financing |
|
|
provided under this section must be secured and repaid by |
|
|
catastrophe surcharges under Subchapter M-2, Chapter 2210, |
|
|
Insurance Code. |
|
|
(c) If the terms of a financing arrangement entered into |
|
|
under this section include interest, the interest rate may not |
|
|
exceed the sum of: |
|
|
(1) the lesser of: |
|
|
(A) the rate set by the Federal Housing Finance |
|
|
Agency; or |
|
|
(B) the federal funds rate as specified by |
|
|
Section 4A.506(b), Business & Commerce Code; and |
|
|
(2) 2 percent. |
|
|
(d) A debt obligation entered into under this section may |
|
|
not exceed 36 months to maturity. |
|
|
(e) Notwithstanding any other law, directly or indirectly |
|
|
through a separately managed account or other investment vehicle, |
|
|
the comptroller may use up to $1 billion of the economic |
|
|
stabilization fund balance to provide financing under this section. |
|
|
(f) The aggregate amount of outstanding pre-event and |
|
|
post-event financing provided under this section may not exceed $1 |
|
|
billion. |
|
|
SECTION 2.16. Effective September 1, 2025, the following |
|
|
provisions of the Insurance Code are repealed: |
|
|
(1) Subchapter B-1, Chapter 2210; and |
|
|
(2) Subchapter M, Chapter 2210. |
|
|
SECTION 2.17. As soon as practicable after the effective |
|
|
date of this Act and not later than December 1, 2023, the |
|
|
commissioner of insurance shall adopt rules necessary to implement |
|
|
Subchapters B-2 and M-2, Insurance Code, as added by this Act. |
|
|
ARTICLE 3. CONFORMING AMENDMENTS FOR ARTICLE 2 |
|
|
SECTION 3.01. Effective September 1, 2025, Section |
|
|
2210.0081, Insurance Code, is amended to read as follows: |
|
|
Sec. 2210.0081. CERTAIN ACTIONS BROUGHT AGAINST |
|
|
ASSOCIATION BY COMMISSIONER. In an action brought by the |
|
|
commissioner against the association under Chapter 441,[: |
|
|
[(1) the association's inability to satisfy |
|
|
obligations under Subchapter M related to the issuance of public |
|
|
securities under this chapter constitutes a condition that makes |
|
|
the association's continuation in business hazardous to the public |
|
|
or to the association's policyholders for the purposes of Section |
|
|
441.052; |
|
|
[(2)] the time for the association to comply with the |
|
|
requirements of supervision or for the conservator to complete the |
|
|
conservator's duties, as applicable, is limited to three years from |
|
|
the date the commissioner commences the action against the |
|
|
association[; and |
|
|
[(3) unless the commissioner takes further action |
|
|
against the association under Chapter 441, as a condition of |
|
|
release from supervision, the association must demonstrate to the |
|
|
satisfaction of the commissioner that the association is able to |
|
|
satisfy obligations under Subchapter M related to the issuance of |
|
|
public securities under this chapter]. |
|
|
SECTION 3.02. (a) Section 2210.056(b), Insurance Code, is |
|
|
amended to read as follows: |
|
|
(b) The association's assets may not be used for or diverted |
|
|
to any purpose other than to: |
|
|
(1) satisfy, in whole or in part, the liability of the |
|
|
association on claims made on policies written by the association; |
|
|
(2) make investments authorized under applicable law; |
|
|
(3) pay reasonable and necessary administrative |
|
|
expenses incurred in connection with the operation of the |
|
|
association and the processing of claims against the association; |
|
|
(4) satisfy, in whole or in part, the obligations of |
|
|
the association incurred in connection with Subchapters B-1, B-2, |
|
|
J, [and] M, and M-2, including reinsurance, public securities, and |
|
|
financial instruments; or |
|
|
(5) make remittance under the laws of this state to be |
|
|
used by this state to: |
|
|
(A) pay claims made on policies written by the |
|
|
association; |
|
|
(B) purchase reinsurance covering losses under |
|
|
those policies; or |
|
|
(C) prepare for or mitigate the effects of |
|
|
catastrophic natural events. |
|
|
(b) Effective September 1, 2025, Sections 2210.056(b) and |
|
|
(c), Insurance Code, are amended to read as follows: |
|
|
(b) The association's assets may not be used for or diverted |
|
|
to any purpose other than to: |
|
|
(1) satisfy, in whole or in part, the liability of the |
|
|
association on claims made on policies written by the association; |
|
|
(2) make investments authorized under applicable law; |
|
|
(3) pay reasonable and necessary administrative |
|
|
expenses incurred in connection with the operation of the |
|
|
association and the processing of claims against the association; |
|
|
(4) satisfy, in whole or in part, the obligations of |
|
|
the association incurred in connection with Subchapters B-2 [B-1], |
|
|
J, and M-2 [M], including reinsurance[, public securities,] and |
|
|
financial instruments; or |
|
|
(5) make remittance under the laws of this state to be |
|
|
used by this state to: |
|
|
(A) pay claims made on policies written by the |
|
|
association; |
|
|
(B) purchase reinsurance covering losses under |
|
|
those policies; or |
|
|
(C) prepare for or mitigate the effects of |
|
|
catastrophic natural events. |
|
|
(c) 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. |
|
|
SECTION 3.03. (a) Section 2210.1052, Insurance Code, is |
|
|
amended to read as follows: |
|
|
Sec. 2210.1052. EMERGENCY MEETING. If the ultimate loss |
|
|
estimate for an occurrence or series of occurrences made by the |
|
|
chief financial officer or chief actuary of the association |
|
|
indicates member insurers may be subject to an assessment under |
|
|
Subchapter B-1 or B-2, the board of directors shall call an |
|
|
emergency meeting to notify the member insurers about the |
|
|
assessment. |
|
|
(b) Effective September 1, 2025, Section 2210.1052, |
|
|
Insurance Code, is amended to read as follows: |
|
|
Sec. 2210.1052. EMERGENCY MEETING. If the ultimate loss |
|
|
estimate for an occurrence or series of occurrences made by the |
|
|
chief financial officer or chief actuary of the association |
|
|
indicates member insurers may be subject to an assessment under |
|
|
Subchapter B-2 [B-1], the board of directors shall call an |
|
|
emergency meeting to notify the member insurers about the |
|
|
assessment. |
|
|
SECTION 3.04. Effective September 1, 2025, Section |
|
|
2210.355(b), Insurance Code, is amended to read as follows: |
|
|
(b) In adopting rates under this chapter, the following must |
|
|
be considered: |
|
|
(1) the past and prospective loss experience within |
|
|
and outside this state of hazards for which insurance is made |
|
|
available through the plan of operation, if any; |
|
|
(2) expenses of operation, including acquisition |
|
|
costs; |
|
|
(3) a reasonable margin for profit and contingencies; |
|
|
and |
|
|
(4) [payment of public security obligations issued |
|
|
under this chapter, including the additional amount of any debt |
|
|
service coverage determined by the association to be required for |
|
|
the issuance of marketable public securities; and |
|
|
[(5)] all other relevant factors, within and outside |
|
|
this state. |
|
|
SECTION 3.05. (a) Section 2210.363(a), Insurance Code, is |
|
|
amended to read as follows: |
|
|
(a) The association may offer a person insured under this |
|
|
chapter an actuarially justified premium discount on a policy |
|
|
issued by the association, or an actuarially justified credit |
|
|
against a surcharge assessed against the person, other than a |
|
|
surcharge assessed under Subchapter M or M-2, if: |
|
|
(1) the construction, alteration, remodeling, |
|
|
enlargement, or repair of, or an addition to, insurable property |
|
|
exceeds applicable building code standards set forth in the plan of |
|
|
operation; or |
|
|
(2) the person elects to purchase a binding |
|
|
arbitration endorsement under Section 2210.554. |
|
|
(b) Effective September 1, 2025, Section 2210.363(a), |
|
|
Insurance Code, is amended to read as follows: |
|
|
(a) The association may offer a person insured under this |
|
|
chapter an actuarially justified premium discount on a policy |
|
|
issued by the association, or an actuarially justified credit |
|
|
against a surcharge assessed against the person, other than a |
|
|
surcharge assessed under Subchapter M-2 [M], if: |
|
|
(1) the construction, alteration, remodeling, |
|
|
enlargement, or repair of, or an addition to, insurable property |
|
|
exceeds applicable building code standards set forth in the plan of |
|
|
operation; or |
|
|
(2) the person elects to purchase a binding |
|
|
arbitration endorsement under Section 2210.554. |
|
|
SECTION 3.06. (a) Sections 2210.452(a) and (d), Insurance |
|
|
Code, are amended to read as follows: |
|
|
(a) The commissioner shall adopt rules under which the |
|
|
association makes payments to the catastrophe reserve trust fund. |
|
|
Except as otherwise specifically provided by this section, the |
|
|
trust fund may be used only for purposes directly related to funding |
|
|
the payment of insured losses, including: |
|
|
(1) funding the obligations of the trust fund under |
|
|
Subchapters [Subchapter] B-1 and B-2; and |
|
|
(2) purchasing reinsurance or using alternative risk |
|
|
financing mechanisms under Section 2210.453. |
|
|
(d) The commissioner by rule shall establish the procedure |
|
|
relating to the disbursement of money from the trust fund to |
|
|
policyholders and for association administrative expenses directly |
|
|
related to funding the payment of insured losses in the event of an |
|
|
occurrence or series of occurrences within a catastrophe area that |
|
|
results in a disbursement under Subchapter B-1 or B-2. |
|
|
(b) Effective September 1, 2025, Sections 2210.452(a), (c), |
|
|
and (d), Insurance Code, are amended to read as follows: |
|
|
(a) The commissioner shall adopt rules under which the |
|
|
association makes payments to the catastrophe reserve trust fund. |
|
|
Except as otherwise specifically provided by this section, the |
|
|
trust fund may be used only for purposes directly related to funding |
|
|
the payment of insured losses, including: |
|
|
(1) funding the obligations of the trust fund under |
|
|
Subchapter B-2 [B-1]; and |
|
|
(2) purchasing reinsurance or using alternative risk |
|
|
financing mechanisms under Section 2210.453. |
|
|
(c) At the end of each calendar year or policy year, the |
|
|
association shall use the net gain from operations of the |
|
|
association, including all premium and other revenue of the |
|
|
association in excess of incurred losses and[,] operating expenses, |
|
|
[public security obligations, and public security administrative |
|
|
expenses,] to make payments to the trust fund, procure reinsurance, |
|
|
or use alternative risk financing mechanisms, or to make payments |
|
|
to the trust fund and procure reinsurance or use alternative risk |
|
|
financing mechanisms. |
|
|
(d) The commissioner by rule shall establish the procedure |
|
|
relating to the disbursement of money from the trust fund to |
|
|
policyholders and for association administrative expenses directly |
|
|
related to funding the payment of insured losses in the event of an |
|
|
occurrence or series of occurrences within a catastrophe area that |
|
|
results in a disbursement under Subchapter B-2 [B-1]. |
|
|
SECTION 3.07. (a) Sections 2210.453(b) and (c), Insurance |
|
|
Code, are amended to read as follows: |
|
|
(b) The association shall maintain total available loss |
|
|
funding in an amount not less than the probable maximum loss for the |
|
|
association for a catastrophe year with a probability of one in 100. |
|
|
If necessary, the required funding level shall be achieved through |
|
|
the purchase of reinsurance or the use of alternative financing |
|
|
mechanisms, or both, to operate in addition to or in concert with |
|
|
the trust fund, public securities, financial instruments, |
|
|
financing arrangements, and assessments authorized by this |
|
|
chapter. |
|
|
(c) The attachment point for reinsurance purchased under |
|
|
this section may not be less than the aggregate amount of all |
|
|
funding available to the association under Subchapters |
|
|
[Subchapter] B-1 and B-2. |
|
|
(b) Effective September 1, 2025, Sections 2210.453(b) and |
|
|
(c), Insurance Code, are amended to read as follows: |
|
|
(b) The association shall maintain total available loss |
|
|
funding in an amount not less than the probable maximum loss for the |
|
|
association for a catastrophe year with a probability of one in 100. |
|
|
If necessary, the required funding level shall be achieved through |
|
|
the purchase of reinsurance or the use of alternative financing |
|
|
mechanisms, or both, to operate in addition to or in concert with |
|
|
the trust fund, [public securities,] financial instruments, |
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|
financing arrangements, and assessments authorized by this |
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chapter. |
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|
(c) The attachment point for reinsurance purchased under |
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|
this section may not be less than the aggregate amount of all |
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|
funding available to the association under Subchapter B-2 [B-1]. |
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ARTICLE 4. TRANSITION AND SAVING PROVISIONS FOR ARTICLES 2 AND 3 |
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SECTION 4.01. Notwithstanding the repeal by this Act of |
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|
Subchapters B-1 and M, Chapter 2210, Insurance Code, and other |
|
|
changes in law made by this Act effective September 1, 2025: |
|
|
(1) the payment of excess losses and operating |
|
|
expenses of the Texas Windstorm Insurance Association incurred |
|
|
before January 1, 2024, is governed by the law as it existed on the |
|
|
effective date of this Act, and that law is continued in effect for |
|
|
that purpose; |
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|
(2) the issuance of public securities to pay excess |
|
|
losses and operating expenses of the Texas Windstorm Insurance |
|
|
Association incurred before January 1, 2024, the use of the |
|
|
proceeds of those securities, the repayment or refinancing of those |
|
|
securities, and any other rights, obligations, or limitations with |
|
|
respect to those securities and proceeds of those securities are |
|
|
governed by the law as it existed on the effective date of this Act, |
|
|
and that law is continued in effect for that purpose; and |
|
|
(3) proceeds of any assessments made under Subchapter |
|
|
B-1, Chapter 2210, Insurance Code, may not be included in reserves |
|
|
available for a catastrophe year for purposes of Section 2210.082, |
|
|
Insurance Code, as added by this Act, unless approved by the |
|
|
commissioner of insurance. |
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|
ARTICLE 5. EFFECTIVE DATE |
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|
SECTION 5.01. Except as otherwise provided by this Act, |
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|
this Act takes effect September 1, 2023. |