By: Taylor of Galveston, et al.	S.B. No. 900

	A BILL TO BE ENTITLED
	AN ACT
	relating to the operation of the Texas Windstorm Insurance
	Association and the renaming of the Texas Windstorm Insurance
	Association as the Texas Coastal Insurance Association.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1.  The heading to Chapter 2210, Insurance Code, is
	amended to read as follows:
	CHAPTER 2210.  TEXAS COASTAL [WINDSTORM] INSURANCE ASSOCIATION
	SECTION 2.  Section 2210.001, Insurance Code, is amended to
	read as follows:
	Sec. 2210.001.  PURPOSE. The primary purpose of the Texas
	Coastal [Windstorm] Insurance Association is the provision of an
	adequate market for windstorm and hail insurance in the seacoast
	territory of this state.  The legislature finds that 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 3.  Section 2210.002, Insurance Code, is amended by
	amending Subsection (a) and adding Subsection (a-1) to read as
	follows:
	(a)  This chapter may be cited as the Texas Coastal
	[Windstorm] Insurance Association Act.
	(a-1)  A reference in this chapter or other law to the Texas
	Windstorm Insurance Association means the Texas Coastal Insurance
	Association.
	SECTION 4.  Section 2210.003, Insurance Code, is amended by
	amending Subdivision (1) and adding Subdivision (1-a) to read as
	follows:
	(1)  "Administrator" means an entity contractually
	retained to manage the association and administer the plan of
	operation under Section 2210.062.
	(1-a)  "Association" means the Texas Coastal
	[Windstorm] Insurance Association.
	SECTION 5.  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)  An administrator contracted under Section 2210.062, if
	applicable, is an agent of the association for purposes of managing
	the association and administering the plan of operation under this
	chapter.
	SECTION 6.  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 of this state.  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 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 7.  Subchapter B, Chapter 2210, Insurance Code, is
	amended by adding Section 2210.062 to read as follows:
	Sec. 2210.062.  ADMINISTRATION BY CONTRACTED ADMINISTRATOR
	AUTHORIZED. (a)  Notwithstanding any other law, if determined by
	the commissioner to be in the best interest of the policyholders and
	the public, the commissioner may contract with an administrator to
	manage the association and administer the plan of operation.
	(b)  The commissioner shall adopt rules as necessary to
	implement this section if the commissioner determines management of
	the association and administration of the plan of operation by an
	administrator is in the best interest of the policyholders and the
	public.
	(c)  The administrator must hold either a managing general
	agent license issued under Chapter 4053 or a third-party
	administrator certificate of authority issued under Chapter 4151.
	SECTION 8.  Subchapter B-1, Chapter 2210, Insurance Code, is
	amended by amending Section 2210.071 and adding Sections 2210.0715,
	2210.07151, 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.
	Sec. 2210.07151.  PAYMENT FROM CLASS 1-A PUBLIC SECURITIES;
	FINANCIAL INSTRUMENTS. (a)  Losses not paid under Section
	2210.0715 shall be paid as provided by this section from the
	proceeds from Class 1-A 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 within a
	period not to exceed 10 years and may be paid sooner if the board of
	directors elects to do so and the commissioner approves.
	(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 $250 million 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 $250 million 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 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 in the manner
	prescribed by Subchapter M.
	(d)  The association may borrow from, or enter into other
	financing arrangements with, any market source, under which the
	market source makes interest-bearing loans or other financial
	instruments to the association to enable the association to pay
	losses under this section or to obtain public securities under this
	section. For purposes of this subsection, financial instruments
	includes commercial paper.
	(e)  The proceeds of any outstanding public securities
	described by Subsection (a) that are issued before an occurrence or
	series of occurrences shall be depleted before the proceeds of any
	securities issued after an occurrence or series of occurrences may
	be used.  This subsection does not prohibit the association from
	issuing securities after an occurrence or series of occurrences
	before the proceeds of outstanding public securities issued during
	a previous catastrophe year have been depleted.
	(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 limit
	on public securities described by this section in the catastrophe
	year in which the proceeds must be depleted.
	Sec. 2210.0716.  PAYMENT FROM CLASS 1 ASSESSMENTS.
	(a)  Losses in a catastrophe year not paid under Sections 2210.0715
	and 2210.07151 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.
	(c)  A member of the association may not recoup an assessment
	paid under this section through a premium surcharge or tax credit.
	[(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.]
	SECTION 9.  The heading to Section 2210.072, Insurance Code,
	is amended to read as follows:
	Sec. 2210.072.  PAYMENT FROM CLASS 1-B [1] PUBLIC
	SECURITIES; FINANCIAL INSTRUMENTS.
	SECTION 10.  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, 2210.07151,
	and 2210.0716 [Section 2210.071(b)] shall be paid as provided by
	this section from the proceeds from Class 1-B [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.
	(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 $250 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 $250 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 [$1
	billion] limit on public securities described by this section in
	the catastrophe year in which the proceeds must be depleted.
	SECTION 11.  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, 2210.07151, 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.
	(c)  A member of the association may not recoup an assessment
	paid under this section through a premium surcharge or tax credit.
	SECTION 12.  Section 2210.073, Insurance Code, is amended to
	read as follows:
	Sec. 2210.073.  PAYMENT FROM CLASS 2 PUBLIC SECURITIES.
	(a)  Losses not paid under Sections 2210.0715, 2210.07151,
	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.
	(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.
	SECTION 13.  Section 2210.075, Insurance Code, is amended to
	read as follows:
	Sec. 2210.075.  REINSURANCE. (a)  Before any occurrence or
	series of occurrences, an insurer may elect to purchase reinsurance
	to cover an assessment for which the insurer would otherwise be
	liable under this subchapter [Section 2210.074(c)].
	(b)  An insurer must notify the board of directors, in the
	manner prescribed by the association whether the insurer will be
	purchasing reinsurance.  If the insurer does not elect to purchase
	reinsurance under this section, the insurer remains liable for any
	assessment imposed under this subchapter [Section 2210.074(c)].
	SECTION 14.  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 [Four] members must be representatives of the
	insurance industry who do not reside 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 reside in a second tier coastal county
	[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)  Two members must represent and reside in an area
	located 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)  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 commissioner.  The nominee slate submitted to
	the commissioner under this subsection must include at least three
	more names than the number of vacancies.  The commissioner may
	[shall] appoint replacement insurance industry representatives
	from the nominee slate.
	(g)  In addition to the nine members appointed under
	Subsection (a), the [The] commissioner shall appoint three
	individuals [one person] to serve as [a] nonvoting ex officio
	members [member] of the board to advise the board [regarding issues
	relating to the inspection process.   The commissioner may give
	preference in an appointment under this subsection to a person who
	is a qualified inspector under Section 2210.254].  Each [The]
	nonvoting member appointed under this section must:
	(1)  hold an elective office of this state or a
	political subdivision of this state; and
	(2)  reside in and represent one of the following
	areas:
	(A)  the northern portion of the seacoast
	territory [be an engineer licensed by, and in good standing with,
	the Texas Board of Professional Engineers];
	(B)  the southern portion of the seacoast
	territory [(2)  reside in a first tier coastal county]; or [and]
	(C)  an area of this state that is not located in
	the seacoast territory [(3)     be knowledgeable of, and have
	professional expertise in, wind-related design and construction
	practices in coastal areas that are subject to high winds and
	hurricanes].
	(h)  The persons appointed under Subsection (g) [(c)] must
	each reside in a [be from] different area described by Subsection
	(g)(2) and in different counties.
	SECTION 15.  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
	commissioner with cause stated in writing and posted on the
	association's website.  The 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 16.  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 for Class
	1-A or Class 1-B [1] public securities 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 17.  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 18.  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 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,
	public security obligations, and public security administrative
	expenses, to make payments to the trust fund, [to] procure
	reinsurance, or use alternative risk financing mechanisms, or to
	make payments to the trust fund and [to] procure reinsurance or use
	alternative risk financing mechanisms.
	(d)  The commissioner by rule shall establish the procedure
	relating to the disbursement of money from the trust fund to
	policyholders and for association administrative expenses directly
	related to funding the payment of insured losses in the event of an
	occurrence or series of occurrences within a catastrophe area that
	results in a disbursement under Subchapter B-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 Section 2210.453, if the association
	does not have sufficient premium and other revenue.
	SECTION 19.  Section 2210.453, Insurance Code, is amended to
	read as follows:
	Sec. 2210.453.  REINSURANCE AND ALTERNATIVE RISK FINANCING
	MECHANISMS. (a)  The association shall [may:
	[(1)  make payments into the trust fund; and
	[(2)]  purchase reinsurance or use alternative risk
	financing mechanisms in an amount equal to the probable maximum
	loss for the association for a catastrophe year with a probability
	of one in 100.
	(b)  Any [The association may purchase] reinsurance
	purchased or alternative risk financing mechanism used under this
	section operates [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 20.  Section 2210.602, Insurance Code, is amended by
	adding Subdivisions (1-c), (2-a), (2-b), and (3-a) and amending
	Subdivision (2) to read as follows:
	(1-c)  "Class 1-A public securities" means public
	securities authorized to be issued by Section 2210.07151, including
	a commercial paper program authorized before the occurrence of a
	catastrophic event.
	(2)  "Class 1-B [1] public securities" means public
	securities authorized to be issued by Section 2210.072, including a
	commercial paper program authorized before the occurrence of a
	catastrophic event.
	(2-a)  "Class 1-A 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 paying Class
	1-A public securities are deposited.
	(2-b)  "Class 1-B 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 paying Class
	1-B 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 paying Class 2
	public securities are deposited.
	SECTION 21.  Section 2210.604(a), Insurance Code, is amended
	to read as follows:
	(a)  At the request of the association and with the approval
	of the commissioner, the Texas Public Finance Authority shall issue
	Class 1-A, Class 1-B, or [1,] Class 2[, or Class 3] public
	securities.  The association shall submit to the commissioner a
	cost-benefit analysis of various financing methods and funding
	structures when requesting the issuance of public securities under
	this subsection.
	SECTION 22.  Section 2210.608(c), Insurance Code, is amended
	to read as follows:
	(c)  Notwithstanding Subsection (a)(2), the proceeds from
	public securities issued under Section 2210.07151 or 2210.072
	before an occurrence or series of occurrences that results in
	incurred losses, including investment income, may not be used to
	purchase reinsurance for the association.
	SECTION 23.  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
	and[,] 2210.613, [2210.6135, and 2210.6136] as applicable.  Class
	1-A, Class 1-B, or [1,] Class 2[, or Class 3] public securities may
	be issued on a parity or subordinate lien basis with other Class
	1-A, Class 1-B, or [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-A public security trust fund
	or Class 1-B public security trust fund, as applicable, and [public
	security obligation revenue fund,] all revenue collected under
	Section 2210.613 [2210.613(b)] in the Class 2 public security trust
	fund [premium surcharge trust fund, and all revenue collected under
	Sections 2210.613(a) and 2210.6135 in the 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-A public
	security trust fund, the Class 1-B public security trust fund,
	[public security obligation revenue fund, the premium surcharge
	trust fund,] or the Class 2 public security trust fund [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-A public security trust fund, the Class 1-B public
	security trust fund, [public security obligation revenue fund, the
	premium surcharge trust fund,] and the Class 2 public security
	trust fund [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-A public security trust fund, the Class 1-B
	public security trust fund [premium surcharge trust fund], and the
	Class 2 public security trust fund [member assessment trust fund]
	to the extent provided in the proceedings authorizing the credit
	agreement.
	SECTION 24.  Section 2210.610(a), Insurance Code, is amended
	to read as follows:
	(a)  Revenues received from the premium surcharges under
	Sections 2210.612 and [Section] 2210.613 [and member assessments
	under Sections 2210.613 and 2210.6135] may be applied only as
	provided by this subchapter.
	SECTION 25.  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 and [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 26.  Section 2210.612, Insurance Code, is amended to
	read as follows:
	Sec. 2210.612.  PAYMENT OF CLASS 1-A AND CLASS 1-B [1] PUBLIC
	SECURITIES. (a)  The association shall pay Class 1-A and Class 1-B
	[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 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 association policies issued under
	this chapter.
	(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 2210.07151(d) or 2210.072(d) as necessary
	to obtain public securities issued under Section 2210.07151 or
	2210.072, as applicable.  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
	2210.07151(a) or 2210.072(a).
	SECTION 27.  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 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 association policies
	issued under this chapter [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.   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 28.  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 public
	securities issued in accordance with Subchapter B-1, whether Class
	1-A, Class 1-B, or [1,] Class 2[, or Class 3] public securities,
	with public securities payable from the same sources as the
	original public securities.
	SECTION 29.  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-A
	public security trust fund, Class 1-B public security [member
	assessment] trust fund, or Class 2 public security [premium
	surcharge] 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 30.  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 31.  The following provisions of Chapter 2210,
	Insurance Code, are repealed:
	(1)  Section 2210.074;
	(2)  Sections 2210.602(4), (5-a), (6), (6-b), (6-c),
	and (10);
	(3)  Section 2210.605(c); and
	(4)  Sections 2210.6135 and 2210.6136.
	SECTION 32.  (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 October 1, 2015.
	(b)  The commissioner of insurance shall appoint the members
	of the board of directors of the Texas Coastal Insurance
	Association under Section 2210.102, Insurance Code, as amended by
	this Act, effective October 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 October 1, 2015. Such a person is
	eligible for appointment by the commissioner of insurance to the
	new board of directors of the Texas Coastal Insurance Association
	under Section 2210.102, Insurance Code, as amended by this Act.
	(d)  Subchapter M, Chapter 2210, Insurance Code, as it
	existed before the effective date of this Act, is applicable to bond
	obligations incurred under Chapter 2210, Insurance Code, before the
	effective date of this Act, and that law is continued in effect for
	that purpose.
	(e)  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 33.  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.