Bill Text: TX HB3622 | 2013-2014 | 83rd Legislature | Introduced
Bill Title: Relating to the operation of the Texas Windstorm Insurance Association and the FAIR Plan Association.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2013-04-30 - Left pending in committee [HB3622 Detail]
Download: Texas-2013-HB3622-Introduced.html
By: Bonnen of Brazoria | H.B. No. 3622 |
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relating to the operation of the Texas Windstorm Insurance | ||
Association and the FAIR Plan Association. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. SECTION 1. Section 2210.001, Insurance Code, is | ||
amended to read as follows: | ||
The primary purpose of the Texas Insurance Plan [ |
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market for windstorm and hail insurance in the seacoast territory | ||
of this state. The legislature finds the provision of adequate | ||
windstorm and hail insurance is necessary to the economic welfare | ||
of this state, and without that insurance, the orderly growth and | ||
development of this state would be severely impeded. This chapter | ||
provides a method by which adequate windstorm and hail insurance | ||
may be obtained in certain designated portions of the seacoast | ||
territory of this state. The association is intended to serve as a | ||
residual insurer of last resort for windstorm and hail insurance in | ||
the seacoast territory. The association shall: | ||
(1) Function in such a manner as to not be a direct | ||
competitor in the private market; and | ||
(2) provide windstorm and hail insurance coverage to those | ||
who are unable to obtain that coverage in the private market. | ||
SECTION 2. Section 2210.003, Insurance Code, is amended by | ||
amending Subdivision (1) and adding Subdivision (1-a) to read as | ||
follows: | ||
(1) "Association" means the Texas Insurance Plan [ |
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(1-a) "Administrator" means the person contractually | ||
retained to administer the association and the plan of operation | ||
under Sections 2210.062 and 2211.0522. | ||
SECTION 3. Section 2210.014, Insurance Code, is amended by | ||
amending Subsection (b) and adding Subsection (c) to read as | ||
follows: | ||
(b) Chapter 542 does not apply to the processing and | ||
settlement of claims by the association or to an agent or | ||
representative of the association. | ||
(c) Under this section, insurers acting to administer | ||
association claims, and the administrator contracted under | ||
Sections 2210.062 and 2211.0522, are agents of the association. | ||
SECTION 4. Subchapter B, Chapter 2210, Insurance Code, is | ||
amended by adding Sections 2210.062, 2210.063, 2210.064, 2210.065, | ||
2210.066, and 2210.067 to read as follows: | ||
Sec. 2210.062. ADMINISTRATION BY CONTRACTED ADMINISTRATOR. | ||
(a) Notwithstanding any other law, the commissioner shall contract | ||
with an administrator to manage the association and administer the | ||
plan of operation not later than January 1, 2014. | ||
(b) the administrator must hold either, or both, a managing | ||
general agent license or a third party administrator certificate | ||
of authority issued under this code. | ||
(c) The term of the administrator contract may not exceed | ||
five years. The contract may be renewed for additional terms, of | ||
not more than five years for each term. | ||
Sec. 2210.063. COMPENSATION OF ADMINISTRATOR. (a) The | ||
contract between the commissioner and the administrator must | ||
specify the administrator's compensation. The compensation must be | ||
based in part on reasonable projections of the cost to administer | ||
the association. | ||
(b) The administrator's compensation will be paid by the | ||
association. | ||
Sec. 2210.064. PROPRIETARY INFORMATION. Any information, | ||
analyses, programs, or data acquired or created by the | ||
administrator under a contract under this subchapter are property | ||
of the association. | ||
Sec. 2210.065. OFFICE; RECORDS. (a) The administrator | ||
shall maintain an office in Austin, Texas. | ||
Sec. 2210.066. AUDIT. The administrator is subject to | ||
audit by the commissioner and shall pay the costs incurred by the | ||
commissioner in performing an audit under this section. | ||
Sec. 2210.067. ANNUAL REPORT TO COMMISSIONER. Not later | ||
than March 1 of each year, the administrator shall submit a report | ||
to the commissioner regarding the operation of the association. | ||
The report must be made in accordance with the terms of the | ||
administrator's contract with the department. | ||
SECTION 5. Section 2210.071, Insurance Code, is amended to | ||
read as follows: | ||
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occurrences in a catastrophe area results in insured losses and | ||
operating expenses of the association in excess of premium and | ||
other revenue of the association, the excess losses and operating | ||
expenses shall be paid as provided by this subchapter. | ||
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SECTION 6. Section 2210.072, Insurance Code, is amended to | ||
read as follows: | ||
Sec. 2210.072. PAYMENT FROM CLASS 1 FUNDS [ |
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losses in excess of premium and other revenue of the association | ||
from available amounts in the catastrophe reserve trust fund and | ||
member assessments as provided by this section. | ||
(b) The catastrophe reserve trust fund shall fund losses | ||
under this section in an amount not to exceed $1 billion. | ||
(c) Following the use of the catastrophe reserve trust fund, | ||
the association may assess its members in an amount not to exceed | ||
the lesser of: | ||
(1) $800 million; or | ||
(2) $1 billion less the amount of catastrophe reserve | ||
trust funds used under Subsection (b). | ||
(d) The total combined amount of catastrophe reserve trust | ||
funds and member assessments used to pay claims under this section | ||
may not exceed $1 billion. | ||
(e) The association shall notify each member of the | ||
association of the amount of the member's assessment under this | ||
section. The proportion of the losses allocable to each insurer | ||
under this section shall be determined in the manner used to | ||
determine each insurer's participation in the association for the | ||
year under Section 2210.052. | ||
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SECTION 7. Section 2210.074, Insurance Code, is amended to | ||
read as follows: | ||
Section 2210.074. PAYMENT THROUGH CLASS 3 FUNDS [ |
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2210.072, and 2210.073 shall be paid as provided by this section | ||
from proceeds of member assessments as provided by this section. | ||
(b) The amount of member assessments that may be made under | ||
this section may not exceed $800 million less the amount of | ||
assessments made under Section 2210.072(c). [ |
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(c) [ |
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association of the amount of the member's assessment under this | ||
section. The proportion of the losses allocable to each insurer | ||
under this section shall be determined in the manner used to | ||
determine each insurer's participation in the association for the | ||
year under Section 2210.052. | ||
SECTION 8. Subchapter B-1, Chapter 2210, Insurance Code, is | ||
amended by adding Section 2210.076 to read as follows: | ||
Sec. 2210.076. PREMIUM TAX CREDIT. (a) The first $300 | ||
million assessed to association members insurers under this | ||
Subchapter during a catastrophe year shall be entitled to a premium | ||
tax credit as provided in subsection (b). | ||
(b) An insurer may credit an amount paid in accordance with | ||
subsection (a) in a catastrophe year against the insurer's premium | ||
tax under Chapter 221. The tax credit authorized under this | ||
subsection shall be allowed at a rate not to exceed 20 percent per | ||
year for five or more successive years following the year of payment | ||
of the claims. The balance of payments made by the insurer and not | ||
claimed as a premium tax credit may be reflected in the books and | ||
records of the insurer as an admitted asset of the insurer for all | ||
purposes, including exhibition in an annual statement under Section | ||
862.001. | ||
SECTION 9. Section 2210.452, Insurance Code, is amended by | ||
amending Subsections (a), (c), and (d) and adding Subsection (e) to | ||
read as follows: | ||
(a) The commissioner shall adopt rules under which the | ||
association makes payments to the catastrophe reserve trust | ||
fund. The trust fund may be used only to fund the obligations of | ||
the trust fund under Subchapter B-1, Section 2210.4522, and | ||
purchase reinsurance 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, operating expenses, | ||
deposits to the trust fund under Section 2210.4521, and public | ||
security obligations, and public security administrative expenses, | ||
to make payments to the trust fund, to procure reinsurance, or to | ||
make payments to the trust fund and to procure reinsurance. | ||
(d) The commissioner by rule shall establish the procedure | ||
relating to the disbursement of money from the trust fund to | ||
policyholders and association administrative expenses in the event | ||
of an occurrence or series of occurrences within a catastrophe area | ||
that results in a disbursement under Subchapter B-1. | ||
(e) The commissioner by rule shall establish the procedure | ||
relating to the disbursement of money from the trust fund to pay for | ||
operating expenses, including reinsurance, under Section 2210.453 | ||
if the association does not have sufficient premium and other | ||
revenue. | ||
SECTION 10. Subchapter J, Chapter 2210, Insurance Code, is | ||
amended by adding Sections 2210.4521 and 2210.4522 to read as | ||
follows: | ||
Sec. 2210.4521. CATASTROPHE RESERVE TRUST FUND DEDICATION. | ||
(a) Notwithstanding any other provision in this chapter, as | ||
provided for in the plan of operation the association shall deposit | ||
monthly in a trust fund an amount to accumulate on an annual | ||
calendar year basis the greater of: | ||
(1) $200 million; or | ||
(2) one half of the association's earned premium for | ||
the current calendar year. | ||
(b) The association shall deposit money collected under | ||
this section with the Texas Treasury Safekeeping Trust Company to | ||
be held outside the state treasury. | ||
(c) Not later than February 1 of each year the association | ||
shall direct the Texas Treasury Safekeeping Trust Company to | ||
deposit all amounts deposited in the trust fund during the | ||
preceding calendar year, and interest earned on those funds, into | ||
the catastrophe reserve trust fund. | ||
(d) Money deposited in the trust fund under this section is | ||
irrevocably pledged to be distributed to the catastrophe reserve | ||
trust fund as provided in this section and is exempt from any other | ||
claim or attachment under law. | ||
(e) Money deposited under this section may be invested by | ||
the Texas Treasury Safekeeping Trust Company as permitted by | ||
general law. | ||
Sec. 2210.4522. CLASS 2 PUBLIC SECURITY ALLOCATION. (a) If | ||
class 2 public securities are outstanding and payable, the | ||
commissioner may authorize the transfer of any portion of the | ||
amount of catastrophe reserve trust funds in excess of $1 billion to | ||
the premium surcharge trust fund established for the payment of | ||
Class 2 public securities and public security administrative | ||
expenses under Section 2210.613. | ||
(b) The commissioner shall consider the transfer under this | ||
section when determining the premium surcharge under Section | ||
2210.613. | ||
SECTION 11. Section 2210.453, Insurance Code, is amended by | ||
amending Subsection (b) and adding subsection (b-1) to read as | ||
follows: | ||
(b) The association may purchase reinsurance that operates | ||
in addition to [ |
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Section 2210.074 [ |
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(b-1) The association may not purchase reinsurance that has | ||
an attachment point preceding the member insurer's assessment | ||
liabilities under Section 2210.074. | ||
SECTION 12. Subchapter L-1, Chapter 2210, Insurance Code, | ||
is amended by adding Section 2210.5725 to read as follows: | ||
Sec. 2210.5725. ASSOCIATION CLAIMS PROCESSING. (a) An | ||
insurer that has primary coverage on property for loss by fire must | ||
adjust all claims made on or after June 1, 2013, on an association | ||
policy covering the same property. | ||
(b) An insurer acting under this section is an agent of the | ||
association for purposes of Sections 2210.014 and 2210.572 and | ||
shall process claims as prescribed by this chapter and the plan of | ||
operation. | ||
(c) An insurer acting under this section is not liable for | ||
any amount payable under the terms of the association policy. | ||
SECTION 13. Section 2210.602, Insurance Code, is amended by | ||
amending Subdivisions (2), (3), (4), (5), (5-a), (6), (6-b), and | ||
(6-c) to read as follows: | ||
(2) [ |
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securities authorized to be issued on or after the occurrence of a | ||
catastrophic event by Section 2210.073. | ||
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(3) [ |
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by Chapter 1371, Government Code. | ||
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(4)[ |
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insurer authorized to engage in the business of property and | ||
casualty insurance in this state and an affiliate of such an | ||
insurer, as described by Section 823.003, including an affiliate | ||
that is not authorized to engage in the business of property and | ||
casualty insurance in this state. The term specifically includes a | ||
county mutual insurance company, a Lloyd's plan, and a reciprocal | ||
or interinsurance exchange. | ||
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dedicated trust fund established by the board and held by the Texas | ||
Treasury Safekeeping Trust Company into which member assessments | ||
collected under Sections 2210.613 and 2210.6135 are deposited. | ||
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dedicated trust fund established by the board and held by the Texas | ||
Treasury Safekeeping Trust Company into which premium surcharges | ||
collected under Section 2210.613 are deposited. | ||
SECTION 14. Section 2210.609, Insurance Code, is amended to | ||
read as follows: | ||
Sec. 2210.609. REPAYMENT OF ASSOCIATION'S PUBLIC SECURITY | ||
OBLIGATIONS. (a) The board and the association shall enter into | ||
an agreement under which the association shall provide for the | ||
payment of all public security obligations from available funds | ||
collected by the association and deposited into the public security | ||
obligation revenue fund. If the association determines that it is | ||
unable to pay the public security obligations and public security | ||
administrative expenses, if any, with available funds, the | ||
association shall pay those obligations and expenses in accordance | ||
with Section [ |
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securities may be issued on a parity or subordinate lien basis with | ||
other [ |
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(b) If any public securities issued under this chapter are | ||
outstanding, the authority shall notify the association of the | ||
amount of the public security obligations and the estimated amount | ||
of public security administrative expenses, if any, each calendar | ||
year in a period sufficient, as determined by the association, to | ||
permit the association to determine the availability of funds, | ||
assess members of the association under Section [ |
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(c) The association shall deposit all revenue collected | ||
under [ |
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premium surcharge trust fund, and all revenue collected under | ||
Section [ |
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assessment trust fund. Money deposited in a fund may be invested | ||
as permitted by general law. Money in a fund required to be used to | ||
pay public security obligations and public security administrative | ||
expenses, if any, shall be transferred to the appropriate funds in | ||
the manner and at the time specified in the proceedings authorizing | ||
the public securities to ensure timely payment of obligations and | ||
expenses. This may include the board establishing funds and | ||
accounts with the comptroller that the board determines are | ||
necessary to administer and repay the public security | ||
obligations. If the association has not transferred amounts | ||
sufficient to pay the public security obligations to the board's | ||
designated interest and sinking fund in a timely manner, the board | ||
may direct the Texas Treasury Safekeeping Trust Company to transfer | ||
from the public security obligation revenue fund, the premium | ||
surcharge trust fund, or the member assessment trust fund to the | ||
appropriate account the amount necessary to pay the public security | ||
obligation. | ||
(d) The association shall provide for the payment of the | ||
public security obligations and the public security administrative | ||
expenses by irrevocably pledging revenues received from | ||
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deposit in the public security obligation revenue fund, the premium | ||
surcharge trust fund, and the member assessment trust fund, | ||
together with any public security reserve fund, as provided in the | ||
proceedings authorizing the public securities and related credit | ||
agreements. | ||
(e) An amount owed by the board under a credit agreement | ||
shall be payable from and secured by a pledge of revenues received | ||
by the association or amounts from the public security obligation | ||
trust fund, the premium surcharge trust fund, and the member | ||
assessment trust fund to the extent provided in the proceedings | ||
authorizing the credit agreement. | ||
SECTION 15. Section 2210.610(a), Insurance Code, is amended | ||
to read as follows: | ||
(a) Revenues received from the premium surcharges under | ||
Section 2210.613 and member assessments under Section [ |
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2210.613 [ |
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subchapter. | ||
SECTION 16. Section 2210.611, Insurance Code, is amended to | ||
read as follows: | ||
Sec. 2210.611. EXCESS REVENUE COLLECTIONS AND INVESTMENT | ||
EARNINGS. Revenue collected in any calendar year from a premium | ||
surcharge under Section 2210.613 and member assessments under | ||
Section [ |
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of the public security obligations and public security | ||
administrative expenses payable in that calendar year and interest | ||
earned on the public security obligation fund may, in the | ||
discretion of the association, be: | ||
(1) used to pay public security obligations payable in | ||
the subsequent calendar year, offsetting the amount of the premium | ||
surcharge and member assessments, as applicable, that would | ||
otherwise be required to be levied for the year under this | ||
subchapter; | ||
(2) used to redeem or purchase outstanding public | ||
securities; or | ||
(3) deposited in the catastrophe reserve trust fund. | ||
SECTION 17. Section 2210.614, Insurance Code, is amended to | ||
read as follows: | ||
Sec. 2210.614. REFINANCING PUBLIC SECURITIES. The | ||
association may request the board to refinance any Class 2 public | ||
securities issued in accordance with Subchapter B-1 [ |
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securities payable from the same sources as the original public | ||
securities. | ||
SECTION 18. Subchapter B, Chapter 2211, Insurance Code, is | ||
amended by adding Section 2211.0522 to read as follows: | ||
Sec. 2211.0522. ADMINISTRATION BY CONTRACTED | ||
ADMINISTRATOR. (a) Notwithstanding any other law, the | ||
commissioner shall contract with an administrator, as described | ||
under Sections 2210.003, 2210.014, 2210.063, 2210.064, | ||
2210.065,2210.066, and 2210.067, to manage the association and | ||
administer the plan of operation not later than January 1, 2014. | ||
(b) the administrator must hold either, or both, a managing | ||
general agent license or a third party administrator certificate | ||
of authority issued under this code. | ||
(c) The term of the administrator contract may not exceed | ||
five years. The contract may be renewed for additional terms, of | ||
not more than five years for each term. | ||
SECTION 19. Sections 2210.605(c), 2210.608(c), 2210.612, | ||
2210.6135, and 2210.6136, Insurance Code, are repealed. | ||
SECTION 20. Notwithstanding Section 2210.4521 as added by | ||
this Act, beginning on the effective date of this Act and continuing | ||
until December 31, 2013, the association shall deposit one-half of | ||
its earned premium into the trust described by that section. Money | ||
collected in calendar year 2013 shall be deposited in the | ||
catastrophe reserve trust fund as described by that section. | ||
Section 2210.4521 shall apply to all association premium earned on | ||
and after January 1, 2014. | ||
SECTION 21. Notwithstanding Section 2210.072 as amended by | ||
this Act, amounts collected under Section 2210.4521 and SECTION 20 | ||
of this Act, may not be used to pay for a covered insured | ||
association loss occurring prior to the effective date of this Act. | ||
SECTION 22. (a) Effective January 1, 2014, the name of the Texas | ||
Windstorm Insurance Association is changed to Texas Insurance Plan | ||
and all powers, duties, rights, and obligations of the Texas | ||
Windstorm Insurance Association are the powers, duties, rights, and | ||
obligations of the Texas Insurance Plan. | ||
(b) Effective January 1, 2014, a reference in law to the | ||
Texas Windstorm Insurance Association is a reference to the Texas | ||
Insurance Plan. | ||
(c) The Texas Windstorm Insurance Association shall adopt a | ||
timetable for phasing in the change of the association's name so as | ||
to minimize the fiscal impact of the name change. Until January 1, | ||
2014, to allow for phasing in the change of the association's name | ||
and in accordance with the timetable established as required by | ||
this section, the association may perform any act authorized by law | ||
for the Texas Windstorm Insurance Association as the Texas | ||
Insurance Plan. Any act of the Texas Windstorm Insurance | ||
Association acting as the Texas Insurance Plan after the effective | ||
date of this Act and before January 1, 2014, is an act of the Texas | ||
Windstorm Insurance Association. | ||
SECTION 23. The commissioner may, by order, require the | ||
administrator retained to administer the Texas Insurance Plan under | ||
Section 2210.062 to assume responsibility for administering the | ||
Texas Insurance Plan and the plan of operation as described in | ||
Section 2210.062 of this Act prior to January 1, 2014. | ||
SECTION 24. 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 on the 91st day after the last day of | ||
the legislative session. |