By: Middleton, et al. S.B. No. 2530

A BILL TO BE ENTITLED

AN ACT

relating to the Texas Windstorm Insurance Association.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 2210.014, Insurance Code, is amended by adding Subsection (d) to read as follows:

(d) The association is not subject to any insurance premium tax or insurance maintenance fee or tax.

SECTION 2. Subchapter A, Chapter 2210, Insurance Code, is amended by adding Section 2210.016 to read as follows:

Sec. 2210.016. LEGISLATIVE LOBBYING. (a) The association may not use any money under its control to attempt to influence the passage or defeat of a legislative measure.

(b) An association employee or member of the board of directors who violates Subsection (a) is subject to:

(1) immediate termination; and

(2) a fine of $10,000 to be deposited in the catastrophe reserve trust fund.

(c) This section does not prohibit an association employee or member of the board of directors from using money under the association's control to provide public information or to provide information responsive to a request for public information.

SECTION 3. Subchapter B, Chapter 2210, Insurance Code, is amended by adding Section 2210.063 to read as follows:

Sec. 2210.063. LOCATION OF ASSOCIATION HEADQUARTERS. The headquarters of the association must be located in a first tier coastal county or a second tier coastal county.

SECTION 4. Section 2210.072(a), Insurance Code, is amended to read as follows:

(a) Losses not paid under Section 2210.0715 shall be paid as provided by this section from the proceeds from Class 1 public securities issued in accordance with Subchapter M before, on, or after the date of any occurrence or series of occurrences that results in insured losses. Public securities described by this section must be paid within a period not to exceed 14 years, and shall [may] be paid sooner if the board of directors identifies that the association has the ability [elects] to do so and the commissioner approves.

SECTION 5. Section 2210.0725(a), Insurance Code, is amended to read as follows:

(a) Losses in a catastrophe year not paid under Sections 2210.0715 and 2210.072 shall be paid as provided by this section from Class 1 member assessments in an amount of at least [not to exceed] $500 million, adjusted annually proportional to the growth in the association's probable maximum loss, for that catastrophe year.

SECTION 6. Section 2210.073(a), Insurance Code, is amended to read as follows:

(a) Losses not paid under Sections 2210.0715, 2210.072, and 2210.0725 shall be paid as provided by this section from the proceeds from Class 2 public securities authorized to be issued in accordance with Subchapter M on or after the date of any occurrence or series of occurrences that results in insured losses. Public securities issued under this section must be paid within a period not to exceed 10 years and shall [may] be paid sooner if the board of directors identifies that the association has the ability [elects] to do so and the commissioner approves.

SECTION 7. Section 2210.074(a), Insurance Code, is amended to read as follows:

(a) Losses in a catastrophe year not paid under Sections 2210.0715, 2210.072, 2210.0725, and 2210.073 shall be paid as provided by this section from Class 2 member assessments in an amount of at least [not to exceed] $250 million, adjusted annually proportional to the growth in the association's probable maximum loss, for that catastrophe year.

SECTION 8. Section 2210.0741(a), Insurance Code, is amended to read as follows:

(a) Losses not paid under Sections 2210.0715, 2210.072, 2210.0725, 2210.073, and 2210.074 shall be paid as provided by this section from the proceeds from Class 3 public securities authorized to be issued in accordance with Subchapter M on or after the date of any occurrence or series of occurrences that results in insured losses. Public securities issued under this section must be paid within a period not to exceed 10 years and shall [may] be paid sooner if the board of directors identifies that the association has the ability [elects] to do so and the commissioner approves.

SECTION 9. Section 2210.0742(a), Insurance Code, is amended to read as follows:

(a) Losses in a catastrophe year not paid under Sections 2210.0715, 2210.072, 2210.0725, 2210.073, 2210.074, and 2210.0741 shall be paid as provided by this section from Class 3 member assessments in an amount of at least [not to exceed] $250 million, adjusted annually proportional to the growth in the association's probable maximum loss, for that catastrophe year.

SECTION 10. Section 2210.102, Insurance Code, is amended to read as follows:

Sec. 2210.102. COMPOSITION. (a) The board of directors is composed of nine members appointed by the commissioner in accordance with this section.

(b) Three members must be representatives of the insurance industry who actively write and renew windstorm and hail insurance in the first tier coastal counties.

(c) Three members must, as of the date of the appointment, reside in the first tier coastal counties. Each of the following regions must be represented by a member residing in the region and appointed under this subsection:

(1) the region consisting of Cameron, Kenedy, Kleberg, and Willacy Counties;

(2) the region consisting of Aransas, Calhoun, Nueces, Refugio, and San Patricio Counties; and

(3) the region consisting of Brazoria, Chambers, Galveston, Jefferson, and Matagorda Counties and any part of Harris County designated as a catastrophe area under Section 2210.005.

(c-1) At least one [One] of the members appointed under Subsection (c) must be a property and casualty agent who is licensed under this code and is not a captive agent.

(d) Three members must reside in an area of this state that is located outside a first tier coastal county [more than 100 miles from the Texas coastline].

(e) All members must have demonstrated experience in insurance, general business, or actuarial principles and the member's area of expertise, if any, sufficient to make the success of the association probable.

(f) Repealed by Acts 2023, 88th Leg., R.S., Ch. 530 (H.B. 3311), Sec. 1, eff. September 1, 2023.]

(g) Members appointed to the board of directors under Subsections (c) and (d), other than the member appointed under Subsection (c-1), must represent the general public in the regions described by those subsections. A person may not be appointed to represent the general public under Subsection (c) or (d) if the person or the person's spouse:

(1) is employed by or participates in the management of a business entity or other organization:

(A) operating in the property and casualty insurance industry in this state;

(B) receiving money from the association, other than insurance claim payments; or

(C) receiving money from association policyholders with respect to the policyholders' claims;

(2) owns or controls, directly or indirectly, more than a 10 percent interest in a business entity or other organization:

(A) operating in the property and casualty insurance industry in this state;

(B) receiving money from the association, other than insurance claim payments; or

(C) receiving money from association policyholders with respect to the policyholders' claims; or

(3) uses or receives a substantial amount of tangible goods, services, or money from the association, other than:

(A) insurance claim payments; or

(B) compensation or reimbursement authorized by law for the board members' membership, attendance, or expenses.

(h) Repealed by Acts 2015, 84th Leg., R.S., Ch. 615 , Sec. 31(1), eff. September 1, 2015.

SECTION 11. Section 2210.105, Insurance Code, is amended by adding Subsections (h) and (i) to read as follows:

(h) A meeting to establish the association's probable maximum loss and the annual rate setting meeting shall be held in-person at a location within a first tier coastal county.

(i) A vote by a member of the board of directors at a meeting described by Subsection (h) shall only count towards the establishment of the probable maximum loss or the adoption of the annual rate filing if the vote is cast by a member of the board of directors in person at the meeting.

SECTION 12. Subchapter E, Chapter 2210, Insurance Code, is amended by adding Section 2210.211 to read as follows:

Sec. 2210.211. LIMITATIONS ON CERTAIN ADJUSTMENTS. The association may not adjust premiums, fees, or any other costs to policyholders for inflation without a vote by the board of directors.

SECTION 13. Sec. 2210.352(a), Insurance Code, is amended to read as follows:

(a) Not later than September [August] 15 of each year, the association shall file with the department a proposed manual rate for all types and classes of risks written by the association.

SECTION 14. Section 2210.355(b), Insurance Code, is amended to read as follows:

(b) In adopting rates under this chapter, the following must be considered:

(1) the past and prospective loss experience within [and outside] this state of hazards for which insurance is made available through the plan of operation, if any;

(2) expenses of operation, including acquisition costs;

(3) a reasonable margin for profit and contingencies;

(4) payment of public security obligations 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 15. Section 2210.453(b), Insurance Code, is 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 50 [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, and assessments authorized by this chapter.

SECTION 16. Subchapter J, Chapter 2210, Insurance Code, is amended by adding Section 2210.4531 to read as follows:

Sec. 2210.4531. DETERMINATION OF PROBABLE MAXIMUM LOSS. (a) The association shall file with the department a proposed probable maximum loss, subject to Section 2210.453.

(b) In determining the probable maximum loss, the association:

(1) shall, to the extent possible, contract with any disinterested third parties necessary to execute any catastrophe models that were executed in the preceding storm season;

(2) shall, if the association is unable to contract for the execution of a catastrophe model described by Subdivision (2), contract with any disinterested third party necessary to execute a catastrophe model that is substantially similar to the model for which the association is unable to contract under Subdivision (2);

(3) may contract with any disinterested third parties to execute catastrophe models in addition to the models required under Subdivisions (1) and (2);

(4) shall provide to a disinterested third party executing a catastrophe model any information necessary to comply with this subsection;

(5) may not use a combination of catastrophe models to determine the probable maximum loss; and

(6) may use only the catastrophe model that produces the lowest probable maximum loss.

(c) The association shall make any information produced in compliance with Subsection (b) publicly available on the association's Internet website.

(d) The association may only use a probable maximum loss that is approved by the commissioner. The commissioner may reject a probable maximum loss filed with the department by the association and set a probable maximum loss at any amount determined by the commissioner.

(e) The amount of loss adjustment expense, as adopted by the board of directors for a catastrophe year and used for the association's rate indication for purposes of filing a rate under this chapter, must be considered above the probable maximum loss.

SECTION 17. Section 2210.063, Insurance Code, as added by this Act, applies to the Texas Windstorm Insurance Association beginning on January 1, 2027.

SECTION 18. Sections 2210.0725(a), 2210.074(a), and 2210.0742(a), as amended by this Act, applies to assessments beginning January 1, 2026. The amounts of assessments on January 1, 2026 shall be equivalent to the amount of assessments on that date after adjusted to the growth in the association's probable maximum loss from January 1, 2021 to January 1, 2026.

SECTION 19. 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, 2025.