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

(In the Senate - Filed March 13, 2025; April 3, 2025, read first time and referred to Committee on Business & Commerce; April 28, 2025, reported adversely, with favorable Committee Substitute by the following vote: Yeas 11, Nays 0; April 28, 2025, sent to printer.) Click here to see the committee vote

COMMITTEE SUBSTITUTE FOR S.B. No. 2530 By: Blanco

A BILL TO BE ENTITLED

AN ACT

relating to the Texas Windstorm Insurance Association; providing an administrative penalty.

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 2210.017 to read as follows:

Sec. 2210.017. 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) an administrative penalty under Chapter 84 in the amount 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 must [may] be paid sooner if the board of directors determines 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 of at least [not to exceed] $500 million, adjusted annually in proportion 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 must [may] be paid sooner if the board of directors determines 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 of at least [not to exceed] $250 million, adjusted annually in proportion 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 must [may] be paid sooner if the board of directors determines 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 of at least [not to exceed] $250 million, adjusted annually in proportion to the growth in the association's probable maximum loss for that catastrophe year.

SECTION 10. Sections 2210.102(c), (c-1), and (d), Insurance Code, are amended to read as follows:

(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 of a first tier coastal county [more than 100 miles from the Texas coastline].

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

(d) Except for an emergency meeting or a meeting described by Subsection (h), a meeting of the board of directors shall be held at a location as determined by the board of directors.

(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. Notwithstanding Section 2210.1051, a member of the board of directors may only vote for the establishment of the probable maximum loss or the adoption of the annual rate filing in person at a meeting held under this subsection.

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. Sections 2210.352(a) and (c), Insurance Code, are 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.

(c) Except as provided by Subsection (a-1), the commissioner shall approve or disapprove the filing in writing not later than November [October] 15 of the year in which the filing was made. If the filing is not approved or disapproved on or before that date, the filing is considered approved.

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, Insurance Code, is amended by amending Subsection (b) and adding Subsection (b-1) 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.

(b-1) The probable maximum loss described by Subsection (b) shall be established as provided by Section 2210.4531.

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

Sec. 2210.4531. PROBABLE MAXIMUM LOSS. (a) The association shall file with the department a proposed probable maximum loss to be used for purposes of Section 2210.453(b). The association may not propose a probable maximum loss unless two-thirds of the board of directors votes to approve the proposed probable maximum loss in the manner provided by Section 2210.105(h).

(b) The association may use a probable maximum loss only if the probable maximum loss is approved by the commissioner.

(c) The commissioner may reject a proposed probable maximum loss filed with the department under Subsection (a) and set a probable maximum loss in an amount determined by the commissioner. If the association does not timely propose a probable maximum loss, the commissioner shall set a probable maximum loss.

(d) The amount of loss adjustment expense 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 may not be included in 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. (a) Subchapter B-1, Chapter 2210, Insurance Code, as amended by this Act, applies only to the payment of losses of the Texas Windstorm Insurance Association incurred on or after January 1, 2026. Payment of losses incurred before January 1, 2026, 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.

(b) On January 1, 2026, the minimum amounts of member assessments for purposes of Sections 2210.0725(a), 2210.074(a), and 2210.0742(a), Insurance Code, as amended by this Act, are adjusted in proportion to the growth in the association's probable maximum loss between January 1, 2021, and 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.

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