84R2797 PMO-D
	By: Hunter	H.B. No. 696

	A BILL TO BE ENTITLED
	AN ACT
	relating to the operation of the Texas Windstorm Insurance
	Association; affecting surcharges.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1.  Subchapter A, Chapter 2210, Insurance Code, is
	amended by adding Section 2210.015 to read as follows:
	Sec. 2210.015.  STUDY OF MARKET INCENTIVES; BIENNIAL
	REPORTING.  (a)  Each biennium, the department shall conduct a study
	of market incentives to promote participation in the voluntary
	windstorm and hail insurance market in the seacoast territory. The
	study must address as possible incentives the mandatory or
	voluntary issuance of windstorm and hail insurance in conjunction
	with the issuance of a homeowners policy or other residential
	property insurance policy in the seacoast territory.
	(b)  The department shall include the results of the study
	conducted under this section in the report submitted under Section
	32.022.
	SECTION 2.  Subchapter B-1, Chapter 2210, Insurance Code, is
	amended by amending Section 2210.071 and adding Sections 2210.0715
	and 2210.0716 to read as follows:
	Sec. 2210.071.  PAYMENT OF EXCESS LOSSES[; PAYMENT FROM
	RESERVES AND TRUST FUND].  [(a)]  If, in a catastrophe year, an
	occurrence or series of 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.
	Sec. 2210.0715.  PAYMENT FROM RESERVES AND TRUST FUND. [(b)]
	The association shall pay losses in excess of premium and other
	revenue of the association from available reserves of the
	association and available amounts in the catastrophe reserve trust
	fund.
	[(c)     Losses not paid under Subsection (b) shall be paid from
	the proceeds from public securities issued in accordance with this
	subchapter and Subchapter M and, notwithstanding Subsection (a),
	may be paid from the proceeds of public securities issued under
	Section 2210.072(a) before an occurrence or series of occurrences
	that results in insured losses.]
	Sec. 2210.0716.  PAYMENT FROM CLASS 1 ASSESSMENTS. (a)
	Losses in a catastrophe year not paid under Section 2210.0715 shall
	be paid as provided by this section from Class 1 member assessments
	not to exceed $500 million for that catastrophe year.
	(b)  The association, with the approval of the commissioner,
	shall notify each member 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 3.  Sections 2210.072(a), (b), (b-1), (c), and (f),
	Insurance Code, are amended to read as follows:
	(a)  Losses not paid under Sections 2210.0715 and 2210.0716
	[Section 2210.071(b)] shall be paid as provided by this section
	from the proceeds from Class 1 public securities authorized to be
	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 issued under this section must be paid
	[repaid] within a period not to exceed 10 [14] years[,] and may be
	paid [repaid] sooner if the board of directors elects to do so and
	the commissioner approves, except that early payment may not result
	in an increase to any assessment or premium surcharge imposed under
	this chapter.
	(b)  Public securities described by Subsection (a) that are
	issued before an occurrence or series of occurrences that results
	in incurred losses:
	(1)  may be issued on the request of the board of
	directors with the approval of the commissioner; and
	(2)  may not, in the aggregate, exceed $500 million [$1
	billion] at any one time, regardless of the calendar year or years
	in which the outstanding public securities were issued.
	(b-1)  Public securities described by Subsection (a):
	(1)  shall be issued as necessary in a principal amount
	not to exceed $500 million [$1 billion] per catastrophe year, in the
	aggregate, for securities issued during that catastrophe year
	before the occurrence or series of occurrences that results in
	incurred losses in that year and securities issued on or after the
	date of that occurrence or series of occurrences, and regardless of
	whether for a single occurrence or a series of occurrences; and
	(2)  subject to the [$1 billion] maximum described by
	Subdivision (1), may be issued, in one or more issuances or
	tranches, during the calendar year in which the occurrence or
	series of occurrences occurs or, if the public securities cannot
	reasonably be issued in that year, during the following calendar
	year.
	(c)  If public securities are issued as described by this
	section, the public securities shall be paid [repaid] in the manner
	prescribed by Subchapter M [from association premium revenue].
	(f)  If, under Subsection (e), the proceeds of any
	outstanding public securities issued during a previous catastrophe
	year must be depleted, those proceeds shall count against the $500
	million [$1 billion] limit on public securities described by this
	section in the catastrophe year in which the proceeds must be
	depleted.
	SECTION 4.  Subchapter B-1, Chapter 2210, Insurance Code, is
	amended by adding Section 2210.0725 to read as follows:
	Sec. 2210.0725.  PAYMENT FROM CLASS 2 ASSESSMENTS. (a)
	Losses in a catastrophe year not paid under Sections 2210.0715,
	2210.0716, and 2210.072 shall be paid as provided by this section
	from Class 2 member assessments not to exceed $500 million for that
	catastrophe year.
	(b)  The association, with the approval of the commissioner,
	shall notify each member 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 5.  Sections 2210.073 and 2210.074, Insurance Code,
	are amended to read as follows:
	Sec. 2210.073.  PAYMENT FROM CLASS 2 PUBLIC SECURITIES.  (a)
	Losses not paid under Sections 2210.0715, 2210.0716, [2210.071 and]
	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
	[under this subsection].  Public securities issued under this
	section must be paid [repaid] within a period not to exceed 10
	years[,] and may be paid [repaid] sooner if the board of directors
	elects to do so and the commissioner approves, except that early
	payment may not result in an increase to any assessment or premium
	surcharge imposed under this chapter.
	(b)  Public securities described by Subsection (a):
	(1)  shall [may] be issued as necessary in a principal
	amount not to exceed $500 million [$1 billion] per catastrophe
	year, in the aggregate, whether for a single occurrence or a series
	of occurrences; and
	(2)  subject to the [$1 billion] maximum described by
	Subdivision (1), may be issued, in one or more issuances or
	tranches, during the calendar year in which the occurrence or
	series of occurrences occurs or, if the public securities cannot
	reasonably be issued in that year, during the following calendar
	year.
	(c)  If the losses are paid with public securities described
	by this section, the public securities shall be paid [repaid] in the
	manner prescribed by Subchapter M.
	Sec. 2210.074.  PAYMENT FROM [THROUGH] CLASS 3 PUBLIC
	SECURITIES. (a) Losses not paid under Sections 2210.0715,
	2210.0716, [2210.071,] 2210.072, 2210.0725, and 2210.073 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 [under this subsection
	or through reinsurance as described by Section 2210.075]. Public
	securities issued under this section must be paid [repaid] within a
	period not to exceed 10 years[,] and may be paid [repaid] sooner if
	the board of directors elects to do so and the commissioner
	approves, except that early payment may not result in an increase to
	any assessment or premium surcharge imposed under this chapter.
	(b)  Public securities described by Subsection (a):
	(1)  shall [may] be issued as necessary in a principal
	amount not to exceed $1 billion [$500 million] per catastrophe
	year, in the aggregate, whether for a single occurrence or a series
	of occurrences; and
	(2)  subject to the [$500 million] maximum described by
	Subdivision (1), may be issued, in one or more issuances or
	tranches, during the calendar year in which the occurrence or
	series of occurrences occurs or, if the public securities cannot
	reasonably be issued in that year, during the following calendar
	year.
	(c)  If the losses are paid with public securities described
	by this section, the public securities shall be paid [repaid] in the
	manner prescribed by Subchapter M [through member assessments as
	provided by this section. 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. A member of the association may not
	recoup an assessment paid under this subsection through a premium
	surcharge or tax credit].
	SECTION 6.  Section 2210.102, Insurance Code, is amended by
	amending Subsections (a), (b), (c), (d), (e), and (f) and adding
	Subsections (c-1), (d-1), and (d-2) to read as follows:
	(a)  The board of directors is composed of nine members
	appointed by the governor [commissioner] in accordance with this
	section.
	(b)  Three [Four] members must be representatives of the
	insurance industry who actively write and renew windstorm and hail
	insurance in the seacoast territory.
	(c)  Three [Four] 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 [At least one of the members] 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)  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)  One member must be a representative of an area of this
	state that is not located in the seacoast territory [with
	demonstrated expertise in insurance and actuarial principles].
	(d-1)  One member must be an engineer who:
	(1)  is knowledgeable of, and has professional
	expertise in, wind-related design and construction practices in
	coastal areas that are subject to high winds and hurricanes; and
	(2)  resides in a second tier coastal county.
	(d-2)  One member must be a representative of the financial
	industry who resides in a second tier coastal county.
	(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)  Insurers who are members of the association shall
	nominate, from among those members, persons to fill any vacancy in
	the three [four] board of director seats reserved for
	representatives of the insurance industry.  The board of directors
	shall solicit nominations from the members and submit the
	nominations to the governor [commissioner].  The nominee slate
	submitted to the governor [commissioner] under this subsection must
	include at least three more names than the number of vacancies.  The
	governor may [commissioner shall] appoint replacement insurance
	industry representatives from the nominee slate.
	SECTION 7.  Section 2210.103(c), Insurance Code, is amended
	to read as follows:
	(c)  A member of the board of directors may be removed by the
	governor [commissioner] with cause stated in writing and posted on
	the association's website.  The governor [commissioner] shall
	appoint a replacement in accordance with [the manner provided by]
	Section 2210.102 for a member who leaves or is removed from the
	board of directors.
	SECTION 8.  Subchapter E, Chapter 2210, Insurance Code, is
	amended by adding Sections 2210.2022, 2210.211, and 2210.212 to
	read as follows:
	Sec. 2210.2022.  INFORMATION REQUIRED FOR CERTAIN
	APPLICATIONS. (a) An applicant for new or renewal association
	coverage to take effect on or after January 1, 2016, must include in
	the application the information described by Subsection (b) if the
	applicant has coverage against loss incurred to real or tangible
	personal property at the fixed location for which association
	coverage is sought that is provided under a residential property
	insurance policy, including a residential fire and allied lines
	insurance policy, a farm and ranch owners insurance policy, a
	condominium owners policy, or a tenants policy.
	(b)  The applicant must include in the application the
	following information for each policy providing coverage described
	by Subsection (a):
	(1)  the total premium for the policy, including a
	policy number for coverage issued by the FAIR Plan Association
	under Chapter 2211, if applicable, and:
	(A)  the amount of insurance under the policy on
	the dwelling and contents; or
	(B)  if the policy is a tenants policy or
	condominium owners policy, the insured amount for the contents
	coverage; and
	(2)  the deductibles applicable for the policy.
	Sec. 2210.211.  EXPOSURE REDUCTION PLAN. (a)  The
	association shall reduce the association's total insured exposure
	determined as of January 1, 2015, according to the following
	schedule:
	(1)  not later than January 1, 2018, the amount of the
	association's total insured exposure must reflect a 20 percent
	reduction from the association's total insured exposure as of
	January 1, 2015;
	(2)  not later than January 1, 2020, the amount of the
	association's total insured exposure must reflect a 35 percent
	reduction from the association's total insured exposure as of
	January 1, 2015;
	(3)  not later than January 1, 2022, the amount of the
	association's total insured exposure must reflect a 45 percent
	reduction from the association's total insured exposure as of
	January 1, 2015;
	(4)  not later than January 1, 2024, the amount of the
	association's total insured exposure must reflect a 55 percent
	reduction from the association's total insured exposure as of
	January 1, 2015; and
	(5)  not later than January 1, 2026, the amount of the
	association's total insured exposure must reflect a 60 percent
	reduction from the association's total insured exposure as of
	January 1, 2015.
	(b)  As soon as practicable after January 1, 2018, January 1,
	2020, January 1, 2022, and January 1, 2026, respectively, the board
	of directors shall determine whether the reductions in the
	association's total insured exposure required under Subsection (a)
	have been achieved.
	(c)  If on January 1, 2018, the association did not achieve
	the reduction in the total insured exposure required by Subsection
	(a)(1), the board of directors shall establish a plan to reduce the
	association's total insured exposure, which must include imposing
	an assessment as described by Subsection (f).
	(d)  If on January 1, 2020, January 1, 2022, and January 1,
	2026, respectively, the association did not achieve the reduction
	in the total insured exposure required for that date, the board of
	directors shall establish a plan to reduce the association's total
	insured exposure, which must include imposing an assessment as
	described by Subsection (f).
	(e)  An exposure reduction plan under Subsection (c) or (d)
	must be implemented not later than March 31 in the year in which the
	board of directors determines that the required reduction was not
	achieved and must result in the achievement of the required
	reduction by not later than December 31 of that year.
	(f)  An assessment imposed under this section must be paid
	into the exposure reduction plan fund and is assessed against each
	member of the association that, as determined by the board of
	directors, has not met the member's proportionate responsibility
	for reduction of the association's total insured exposure. The
	total aggregate amount of an assessment under this section, if
	assessed against all members of the association, is $200 million.
	(g)  The amount of a member's assessment paid under
	Subsection (f) must be equal to the portion of $200 million that is
	consistent with the member's proportionate participation in the
	association as determined under Section 2210.052.
	(h)  A member of the association may not recoup an assessment
	paid under this section through a premium surcharge or tax credit or
	through a rate increase.
	(i)  At the request of the commissioner, but not less
	frequently than twice each year, the association shall submit a
	report to the commissioner detailing the amount of the
	association's total insured exposure and any statistical
	information or experience data requested by the commissioner
	concerning the characteristics of that exposure.
	(j)  Not later than May 15 and November 15 of each year, the
	commissioner shall submit a report to the windstorm insurance
	legislative oversight board established under Subchapter N
	summarizing the contents of the report submitted to the
	commissioner under Subsection (i).
	(k)  In determining whether the association has met the goal
	established under Subsection (a), the commissioner shall make
	adjustments to book value of the total insured exposure as of
	January 1, 2015, to reflect any change in the BOECKH Index. If the
	BOECKH Index ceases to exist, the commissioner shall make
	adjustments in the same manner based on another index that the board
	of directors determines accurately reflects changes in the cost of
	construction or residential values in the catastrophe area.
	(l)  Not later than January 1 of each year, the department
	shall notify each member of the association of the member's
	proportionate share of the association's total insured exposure
	required to be reduced under this section and of the member's
	potential liability for an assessment under this section.
	(m)  The commissioner shall adopt rules necessary to
	implement and enforce this section.
	Sec. 2210.212.  CONFIDENTIAL INFORMATION.  (a)  Except as
	provided by Subsection (b), all information, data, and databases
	collected and used under Sections 2210.2022 and 2210.211 are
	confidential information not subject to disclosure under Chapter
	552, Government Code.
	(b)  Information described by Subsection (a) may be used for
	the purposes and in the manner described by this chapter.
	SECTION 9.  The heading to Subchapter J, Chapter 2210,
	Insurance Code, is amended to read as follows:
	SUBCHAPTER J. CATASTROPHE RESERVE TRUST FUND; [AND] REINSURANCE AND
	ALTERNATIVE RISK FINANCING [PROGRAM]
	SECTION 10.  Section 2210.451, Insurance Code, is amended to
	read as follows:
	Sec. 2210.451.  DEFINITION. Except to the extent that
	context clearly requires otherwise, in [In] this subchapter, "trust
	fund" means the catastrophe reserve trust fund.
	SECTION 11.  Section 2210.452, Insurance Code, is amended by
	amending Subsections (a), (c), and (d) and adding Subsection (f) 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
	[The] trust fund may be used only for purposes directly related to
	funding the payment of insured losses, including:
	(1)  funding [to fund] the obligations of the trust
	fund under Subchapter B-1; and
	(2)  purchasing reinsurance or using alternative risk
	financing mechanisms under Sections 2210.453 and 2210.4531.
	(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 fund established under Section 2210.4521, 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 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.
	(f)  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 or alternative risk
	financing mechanisms under Sections 2210.453 and 2210.4531, if the
	association does not have sufficient premium and other revenue.
	SECTION 12.  Subchapter J, Chapter 2210, Insurance Code, is
	amended by adding Section 2210.4521 to read as follows:
	Sec. 2210.4521.  DEDICATED DISTRIBUTIONS TO CATASTROPHE
	RESERVE TRUST FUND. (a)  Notwithstanding any other provision in
	this chapter, as provided for in the plan of operation, the
	association shall deposit monthly in a fund, separate from the
	catastrophe reserve trust fund established under Section 2210.452,
	an amount sufficient to accumulate on an annual calendar year basis
	an amount equal to 30 percent of the association's earned premium
	for the preceding calendar year.
	(b)  The fund described by Subsection (a) is a trust fund
	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 fund described by Subsection
	(a) during the preceding calendar year, and interest earned on
	those amounts, into the catastrophe reserve trust fund.
	(d)  Money deposited in the fund described by Subsection (a)
	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.
	SECTION 13.  Section 2210.453, Insurance Code, is amended to
	read as follows:
	Sec. 2210.453.  REINSURANCE AND ALTERNATIVE RISK FINANCING.
	(a) The association may[:
	[(1)  make payments into the trust fund; and
	[(2)]  purchase reinsurance or use alternative risk
	financing mechanisms in an aggregate amount not greater than $1
	billion.
	(b)  The [association may purchase] reinsurance purchased or
	alternative risk financing mechanisms used under this section
	operate [that operates] in addition to [or in concert with the trust
	fund,] public securities, other approved financial instruments,
	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 Subchapter B-1.  [If the
	association does not purchase reinsurance as authorized by this
	section, the board, not later than June 1 of each year, shall submit
	to the commissioner, the legislative oversight board established
	under Subchapter N, the governor, the lieutenant governor, and the
	speaker of the house of representatives a report containing an
	actuarial plan for paying losses in the event of a catastrophe with
	estimated damages of $2.5 billion or more. The report required by
	this subsection must:
	[(1)     document and denominate the association's
	resources available to pay claims, including cash or other highly
	liquid assets, assessments that the association is projected to
	impose, pre-event and post-event bonding capacity, and
	private-sector recognized risk-transfer mechanisms, including
	catastrophe bonds and reinsurance;
	[(2)     include an independent, third-party appraisal of
	the likelihood of an assessment, the maximum potential size of the
	assessment, and an estimate of the probability that the assessment
	would not be adequate to meet the association's needs; and
	[(3)     include an analysis of financing alternatives to
	assessments that includes the costs of borrowing and the
	consequences that additional purchase of reinsurance, catastrophe
	bonds, or other private-sector recognized risk-transfer
	instruments would have in reducing the size or potential of
	assessments.
	[(d)     A person who prepares a report required by Subsection
	(c) may not contract to provide any other service to the
	association, except for the preparation of similar reports, before
	the third anniversary of the date the last report prepared by the
	person under that subsection is submitted.
	[(e)     The report submitted under this section is for
	informational purposes only and does not bind the association to a
	particular course of action.]
	SECTION 14.  Subchapter J, Chapter 2210, Insurance Code, is
	amended by adding Section 2210.4531 to read as follows:
	Sec. 2210.4531.  ADDITIONAL REINSURANCE. (a)  The
	association may purchase, in addition to any reinsurance purchased
	or alternative risk financing mechanism used under Section
	2210.453, reinsurance in an amount not greater than the lesser of:
	(1)  $800 million; or
	(2)  an amount such that the association's total loss
	funding is sufficient to fund its probable maximum loss for a
	catastrophe year with a probability of one in 100.
	(b)  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 Subchapter B-1 and
	Section 2210.453.
	(c)  The association shall assess member insurers the cost of
	reinsurance purchased under this section. The proportion of the
	reinsurance cost 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 15.  Section 2210.455(b), Insurance Code, is amended
	to read as follows:
	(b)  The catastrophe plan must:
	(1)  describe the manner in which the association will,
	during the period covered by the plan, evaluate losses and process
	claims after the following windstorms affecting an area of maximum
	exposure to the association:
	(A)  a windstorm with a four percent chance of
	occurring during the period covered by the plan;
	(B)  a windstorm with a two percent chance of
	occurring during the period covered by the plan; and
	(C)  a windstorm with a one percent chance of
	occurring during the period covered by the plan; and
	(2)  include, if the association does not purchase
	reinsurance or use an alternative risk financing mechanism under
	this subchapter [Section 2210.453] for the period covered by the
	plan, an actuarial plan for paying losses in the event of a
	catastrophe with estimated damages equal to or greater than the
	total amount of potential funding available through assessments and
	public securities under Subchapter B-1 [of $2.5 billion or more].
	SECTION 16.  Subchapter L-1, Chapter 2210, Insurance Code,
	is amended by adding Section 2210.5725 to read as follows:
	Sec. 2210.5725.  ADJUSTMENT OF CLAIMS BY PRIMARY INSURER.
	An insurer that has primary coverage on property for loss by fire
	must adjust all claims made on an association policy covering the
	same property.
	SECTION 17.  Section 2210.602, Insurance Code, is amended by
	adding Subdivisions (2-a), (3-a), and (4-a) to read as follows:
	(2-a)  "Class 1 public security trust fund" means the
	dedicated trust fund established by the board and held by the Texas
	Treasury Safekeeping Trust Company into which premium surcharges
	collected under Section 2210.612 for the purpose of repaying Class
	1 public securities are deposited.
	(3-a)  "Class 2 public security trust fund" means the
	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 for the purpose of repaying Class
	2 public securities are deposited.
	(4-a)  "Class 3 public security trust fund" means the
	dedicated trust fund established by the board and held by the Texas
	Treasury Safekeeping Trust Company into which premium surcharges
	collected under Section 2210.6135 for the purpose of repaying Class
	3 public securities are deposited.
	SECTION 18.  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 as required by this subchapter
	[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 Sections 2210.612, 2210.613, and
	2210.6135, [and 2210.6136] as applicable.  Class 1, Class 2, or
	Class 3 public securities may be issued on a parity or subordinate
	lien basis with other Class 1, Class 2, or Class 3 public
	securities, respectively.
	(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 Sections 2210.613 and
	2210.6135,] and assess a premium surcharge if necessary.
	(c)  The association shall deposit all revenue collected
	under Section 2210.612 in the Class 1 public security trust fund
	[public security obligation revenue fund], all revenue collected
	under Section 2210.613 [2210.613(b)] in the Class 2 public security
	[premium surcharge] trust fund, and all revenue collected under
	Section [Sections 2210.613(a) and] 2210.6135 in the Class 3 public
	security [member 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 Class 1 public security [public security
	obligation revenue fund, the premium surcharge] trust fund, [or]
	the Class 2 public security trust fund, or the Class 3 public
	security [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 premiums,
	[member assessments,] premium surcharges, and amounts on deposit in
	the Class 1 public security [public security obligation revenue
	fund, the premium surcharge] trust fund, [and] the Class 2 public
	security trust fund, and the Class 3 public security [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 Class 1 public security [premium surcharge] trust
	fund, [and] the Class 2 public security [member assessment] trust
	fund, and the Class 3 public security trust fund, to the extent
	provided in the proceedings authorizing the credit agreement.
	SECTION 19.  Section 2210.610(a), Insurance Code, is amended
	to read as follows:
	(a)  Revenues received from the premium surcharges under
	Sections 2210.612, [Section] 2210.613, and [member assessments
	under Sections 2210.613 and] 2210.6135 may be applied only as
	provided by this subchapter.
	SECTION 20.  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 Sections 2210.612, [Section] 2210.613, and [member
	assessments under Sections 2210.613 and] 2210.6135 that exceeds the
	amount of the public security obligations and public security
	administrative expenses payable in that calendar year and interest
	earned on the funds [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 21.  Section 2210.612, Insurance Code, is amended to
	read as follows:
	Sec. 2210.612.  PAYMENT OF CLASS 1 PUBLIC SECURITIES.
	(a)  The association shall pay Class 1 public securities issued
	under Section 2210.072 from:
	(1)  [its] net premium and other revenue; and
	(2)  if net premium and other revenue are not
	sufficient to pay the securities, a catastrophe area premium
	surcharge collected in accordance with this section.
	(b)  On approval by the commissioner, the association and
	each insurer that provides insurance in a catastrophe area shall
	assess, as provided by this section, a premium surcharge to each
	policyholder of a policy described by Subsection (c).  The premium
	surcharge must be set in an amount sufficient to pay, for the
	duration of the issued public securities, all debt service not
	already covered by available funds and all related expenses on the
	public securities.
	(c)  The premium surcharge under this section shall be
	assessed on all policyholders of policies that cover insured
	property that is located in a catastrophe area, including
	automobiles principally garaged in a catastrophe area.  The premium
	surcharge shall be assessed on each Texas windstorm and hail
	insurance policy and each property and casualty insurance policy,
	including an automobile insurance policy, issued for automobiles
	and other property located in the catastrophe area. The premium
	surcharge applies to:
	(1)  all policies written under the following lines of
	insurance:
	(A)  fire and allied lines;
	(B)  farm and ranch owners;
	(C)  residential property insurance;
	(D)  private passenger automobile liability and
	physical damage insurance; and
	(E)  commercial automobile liability and physical
	damage insurance; and
	(2)  the property insurance portion of a commercial
	multiple peril insurance policy.
	(d)  A premium surcharge under this section is a separate
	charge in addition to the premiums collected and is not subject to
	premium tax or commissions.  Failure by a policyholder to pay the
	surcharge constitutes failure to pay premium for purposes of policy
	cancellation.
	(e) [(b)]  The association may enter financing arrangements
	as described by Section 2210.072(d) as necessary to obtain public
	securities issued under Section 2210.072.  Nothing in this
	subsection shall prevent the authorization and creation of one or
	more programs for the issuance of commercial paper before the date
	of an occurrence or series of occurrences that results in insured
	losses under Section 2210.072(a).
	SECTION 22.  Section 2210.613, Insurance Code, is amended to
	read as follows:
	Sec. 2210.613.  PAYMENT OF CLASS 2 PUBLIC SECURITIES. (a)
	The association shall pay Class 2 public securities issued under
	Section 2210.073 from:
	(1)  net premium and other revenue; and
	(2)  if net premium and other revenue are not
	sufficient to pay the securities, a catastrophe area premium
	surcharge collected in accordance with this section.
	(b)  On approval by the commissioner, the association and
	each insurer that provides insurance in a catastrophe area shall
	assess, as provided by this section, a premium surcharge to each
	policyholder of a policy described by Subsection (c).  The premium
	surcharge must be set in an amount sufficient to pay, for the
	duration of the issued public securities, all debt service not
	already covered by available funds and all related expenses on the
	public securities [as provided by this section.     Thirty percent of
	the cost of the public securities shall be paid through member
	assessments as provided by this section.   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. A member of the
	association may not recoup an assessment paid under this subsection
	through a premium surcharge or tax credit].
	[(b)     Seventy percent of the cost of the public securities
	shall be paid by a premium surcharge collected under this section in
	an amount set by the commissioner.     On approval by the
	commissioner, each insurer, the association, and the Texas FAIR
	Plan Association shall assess, as provided by this section, a
	premium surcharge to each policyholder of a policy that is in effect
	on or after the 180th day after the date the commissioner issues
	notice of the approval of the public securities.     The premium
	surcharge must be set in an amount sufficient to pay, for the
	duration of the issued public securities, all debt service not
	already covered by available funds or member assessments and all
	related expenses on the public securities.]
	(c)  The premium surcharge under this section [Subsection
	(b)] shall be assessed on all policyholders of policies that cover
	insured property that is located in a catastrophe area, including
	automobiles principally garaged in a catastrophe area.  The
	premium surcharge shall be assessed on each Texas windstorm and
	hail insurance policy and each property and casualty insurance
	policy, including an automobile insurance policy, issued for
	automobiles and other property located in the catastrophe area.
	The [A] premium surcharge [under Subsection (b)] applies to:
	(1)  all policies written under the following lines of
	insurance:
	(A)  fire and allied lines;
	(B)  farm and ranch owners;
	(C)  residential property insurance;
	(D)  private passenger automobile liability and
	physical damage insurance; and
	(E)  commercial automobile liability and physical
	damage insurance; and
	(2)  the property insurance portion of a commercial
	multiple peril insurance policy.
	(d)  A premium surcharge under this section [Subsection (b)]
	is a separate charge in addition to the premiums collected and is
	not subject to premium tax or commissions.  Failure by a
	policyholder to pay the surcharge constitutes failure to pay
	premium for purposes of policy cancellation.
	SECTION 23.  Section 2210.6135, Insurance Code, is amended
	to read as follows:
	Sec. 2210.6135.  PAYMENT OF CLASS 3 PUBLIC SECURITIES. (a)
	The association shall pay Class 3 public securities issued under
	Section 2210.074 from:
	(1)  net premium and other revenue; and
	(2)  if net premium and other revenue are not
	sufficient to pay the securities, a statewide premium surcharge
	collected in accordance with this section.
	(b)  On approval of the commissioner, the association and
	each insurer that provides insurance in this state shall assess, as
	provided by this section, a premium surcharge to each policyholder
	of a policy described by Subsection (d). Except as provided by
	Subsection (c), the premium surcharge must be set in an amount
	sufficient to pay, for the duration of the issued public
	securities, all debt service not already covered by available funds
	and all related expenses on the public securities.
	(c)  The amount of the surcharge assessed under Subsection
	(b) may not exceed one percent of the premium charged for the
	policyholder's policy described by Subsection (d).
	(d)  The premium surcharge under this section shall be
	assessed on all policyholders of policies that cover insured
	property located in this state, including automobiles principally
	garaged in this state, written under the following lines of
	insurance:
	(1)  fire and allied lines;
	(2)  farm and ranch owners;
	(3)  residential property insurance; and
	(4)  private passenger automobile liability and
	physical damage insurance.
	(e)  A premium surcharge under this section is a separate
	charge in addition to the premiums collected and is not subject to
	premium tax or commissions.  Failure by a policyholder to pay the
	surcharge constitutes failure to pay premium for purposes of policy
	cancellation [as provided by this section through member
	assessments].  [The association, for the payment of the losses,
	shall assess the members of the association a principal amount not
	to exceed $500 million per catastrophe year.   The association shall
	notify each member of the association of the amount of the member's
	assessment under this section.
	[(b)     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.
	[(c)     A member of the association may not recoup an
	assessment paid under this section through a premium surcharge or
	tax credit.]
	SECTION 24.  Section 2210.616(a), Insurance Code, is amended
	to read as follows:
	(a)  The state pledges for the benefit and protection of
	financing parties, the board, and the association that the state
	will not take or permit any action that would:
	(1)  impair the collection of [member assessments and]
	premium surcharges or the deposit of those funds into the Class 1
	public security [member assessment] trust fund, Class 2 public
	security [or premium surcharge] trust fund, or Class 3 public
	security trust fund;
	(2)  reduce, alter, or impair the [member assessments
	or] premium surcharges to be imposed, collected, and remitted to
	financing parties until the principal, interest, and premium, and
	any other charges incurred and contracts to be performed in
	connection with the related public securities, have been paid and
	performed in full; or
	(3)  in any way impair the rights and remedies of the
	public security owners until the public securities are fully
	discharged.
	SECTION 25.  Section 2210.6165, Insurance Code, is amended
	to read as follows:
	Sec. 2210.6165.  PROPERTY RIGHTS.  If public securities
	issued under this subchapter are outstanding, the rights and
	interests of the association, a successor to the association, any
	member of the association, or any member of the Texas FAIR Plan
	Association, including the right to impose, collect, and receive a
	premium surcharge [or a member assessment] authorized under this
	subchapter, are only contract rights until those revenues are first
	pledged for the repayment of the association's public security
	obligations as provided by Section 2210.609.
	SECTION 26.  Section 2210.653(a), Insurance Code, is amended
	to read as follows:
	(a)  The board shall:
	(1)  receive information about rules proposed by the
	department relating to windstorm insurance and may submit comments
	to the commissioner on the proposed rules;
	(2)  review the reports required by Section
	2210.211(i);
	(3)  monitor windstorm insurance in this state,
	including:
	(A)  the adequacy of rates;
	(B)  the operation of the association; and
	(C)  the availability of coverage; [and]
	(4)  monitor the activities of the association under
	Section 2210.211, including:
	(A)  the performance of the association's
	operations;
	(B)  the association's progress toward meeting
	the requirements of Section 2210.211; and
	(C)  the extent of voluntary market participation
	in coastal and historically underserved areas in this state; and
	(5) [(3)]  review recommendations for legislation
	proposed by the department or the association.
	SECTION 27.  The following provisions of Chapter 2210,
	Insurance Code, are repealed:
	(1)  Section 2210.075;
	(2)  Sections 2210.102(g) and (h);
	(3)  Sections 2210.602(5-a), (6-b), (6-c), and (10);
	(4)  Section 2210.605(c); and
	(5)  Section 2210.6136.
	SECTION 28.  (a)  The board of directors of the Texas
	Windstorm Insurance Association established under Section
	2210.102, Insurance Code, as that section existed before amendment
	by this Act, is abolished effective November 1, 2015.
	(b)  The governor shall appoint the members of the board of
	directors of the Texas Windstorm Insurance Association under
	Section 2210.102, Insurance Code, as amended by this Act, effective
	November 1, 2015.  The initial directors shall draw lots to achieve
	staggered terms, with three of the directors serving one-year
	terms, three of the directors serving two-year terms, and three of
	the directors serving three-year terms.
	(c)  The term of a person who is serving as a member of the
	board of directors of the Texas Windstorm Insurance Association
	immediately before the abolition of that board under Subsection (a)
	of this section expires on November 1, 2015. Such a person is
	eligible for appointment by the governor to the new board of
	directors of the Texas Windstorm Insurance Association under
	Section 2210.102, Insurance Code, as amended by this Act.
	(d)  Notwithstanding Section 2210.4521, Insurance Code, as
	added by this Act, or Subsection (e) of this section, beginning on
	the effective date of this Act and continuing until December 31,
	2015, the Texas Windstorm Insurance Association shall deposit 30
	percent of its earned premium into the trust fund described by that
	section.  Not later than February 1, 2016, the association shall
	direct the Texas Treasury Safekeeping Trust Company to deposit all
	amounts deposited in the trust fund during the 2015 calendar year,
	and interest earned on those funds, into the catastrophe reserve
	trust fund as described by that section.
	(e)  Section 2210.4521, Insurance Code, as added by this Act,
	applies to all Texas Windstorm Insurance Association premium earned
	on and after January 1, 2016.
	(f)  Notwithstanding Subsection (d) of this section and
	Section 2210.0715, Insurance Code, as added by this Act, amounts
	collected under Section 2210.4521, Insurance Code, as added by this
	Act, may not be used to pay for a covered insured association loss
	incurred before June 1, 2015.
	(g)  Section 2210.5725, Insurance Code, as added by this Act,
	applies only to adjustment of a claim made on or after the effective
	date of this Act.
	(h)  It is the intent of the legislature that each member of
	the legislative oversight board appointed under Section 2210.652,
	Insurance Code, and serving on the effective date of this Act
	continues to serve after the effective date of this Act until a
	successor is appointed under that section.
	SECTION 29.  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, 2015.