S.B. No. 900

	AN ACT
	relating to the operation of the Texas Windstorm Insurance
	Association.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1.  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 Windstorm
	Insurance Association.
	SECTION 2.  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 3.  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 4.  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 5.  Subchapter B-1, Chapter 2210, Insurance Code, is
	amended by amending Section 2210.071 and adding Section 2210.0715
	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.
	(a)  [(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.
	(b)  Proceeds of Class 1 public securities issued before the
	date of any occurrence or series of occurrences that results in
	insured losses may not be included in available reserves for
	purposes of this section.
	[(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 6.  Section 2210.072, Insurance Code, is amended to
	read as follows:
	Sec. 2210.072.  PAYMENT FROM CLASS 1 PUBLIC SECURITIES;
	FINANCIAL INSTRUMENTS. (a)  Losses not paid under Section
	2210.0715 [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 described by
	[issued under] this section must be paid [repaid] within a period
	not to exceed 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 $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 repaid in the manner
	prescribed by Subchapter M [from association premium revenue].
	(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, together with the proceeds of any
	outstanding Class 1 public securities issued on or before June 1,
	2015, 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, together with the proceeds of any outstanding Class 1 public
	securities issued on or before June 1, 2015, 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 7.  Subchapter B-1, Chapter 2210, Insurance Code, is
	amended by adding Section 2210.0725 to read as follows:
	Sec. 2210.0725.  PAYMENT FROM CLASS 1 ASSESSMENTS.
	(a)  Losses in a catastrophe year not paid under Sections 2210.0715
	and 2210.072 shall be paid as provided by this section from Class 1
	member assessments 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 8.  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, [2210.071 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 $250 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 9.  Section 2210.074, Insurance Code, is amended to
	read as follows:
	Sec. 2210.074.  PAYMENT THROUGH CLASS 2 ASSESSMENTS [3
	PUBLIC SECURITIES]. (a)  Losses in a catastrophe year not paid
	under Sections 2210.0715, [2210.071,] 2210.072, 2210.0725, and
	2210.073 shall be paid as provided by this section from Class 2
	member assessments not to exceed $250 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
	[proceeds from public securities authorized to be issued in
	accordance with Subchapter M on or after the date of any occurrence
	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 repaid within a period not to
	exceed 10 years, and may be repaid sooner if the board of directors
	elects to do so and the commissioner approves.
	[(b)  Public securities described by Subsection (a):
	[(1)     may be issued as necessary in a principal amount
	not to exceed $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 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 10.  Subchapter B-1, Chapter 2210, Insurance Code,
	is amended by adding Sections 2210.0741 and 2210.0742 to read as
	follows:
	Sec. 2210.0741.  PAYMENT THROUGH CLASS 3 PUBLIC SECURITIES.
	(a)  Losses not paid under Sections 2210.0715, 2210.072,
	2210.0725, 2210.073, and 2210.074 shall be paid as provided by this
	section from the proceeds from Class 3 public securities authorized
	to be issued in accordance with Subchapter M on or after the date of
	any occurrence or series of occurrences that results in insured
	losses.  Public securities issued under this section must be paid
	within a period not to exceed 10 years, and may be paid sooner if the
	board of directors elects to do so and the commissioner approves.
	(b)  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,
	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 the losses are paid with public securities described
	by this section, the public securities shall be paid in the manner
	prescribed by Subchapter M.
	Sec. 2210.0742.  PAYMENT FROM CLASS 3 ASSESSMENTS.
	(a)  Losses in a catastrophe year not paid under Sections
	2210.0715, 2210.072, 2210.0725, 2210.073, 2210.074, and 2210.0741
	shall be paid as provided by this section from Class 3 member
	assessments not to exceed $250 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 11.  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 12.  Section 2210.102, Insurance Code, is amended by
	amending Subsections (b), (c), (d), (e), and (f) and adding
	Subsection (c-1) to read as follows:
	(b)  Three [Four] members must be representatives of the
	insurance industry who actively write and renew windstorm and hail
	insurance in the first tier coastal counties.
	(c)  Three [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)  Three members [One member] must reside in [be a
	representative of] an area of this state that is [not] located more
	than 100 miles from the Texas coastline [in the seacoast territory
	with demonstrated expertise in insurance and actuarial
	principles].
	(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.
	SECTION 13.  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 14.  Section 2210.258, Insurance Code, is amended by
	amending Subsections (a) and (b) and adding Subsection (d) to read
	as follows:
	(a)  Except as provided by Subsections [Subsection] (c) and
	(d) and Section 2210.2581 and notwithstanding any other provision
	of this chapter, to be eligible for insurance through the
	association, all construction, alteration, remodeling,
	enlargement, and repair of, or addition to, any structure located
	in the catastrophe area that is begun on or after the effective date
	of Sections 5 through 49, H.B. No. 4409, Acts of the 81st
	Legislature, Regular Session, 2009, must be performed in compliance
	with the applicable building code standards, as set forth in the
	plan of operation.
	(b)  Except as provided by Subsections [Subsection] (c) and
	(d), the association may not insure a structure described by
	Subsection (a) until:
	(1)  the structure has been inspected for compliance
	with the plan of operation in accordance with Section 2210.251(a);
	and
	(2)  a certificate of compliance has been issued for
	the structure in accordance with Section 2210.251(g).
	(d)  The association may insure a structure described by
	Subsection (a) for a policy term not to exceed 30 days if an
	inspection verification form or other inspection form adopted by
	the department has been issued for the structure for purposes of
	providing temporary coverage while an applicant seeks to secure a
	certificate of compliance for the structure if the structure is
	otherwise insurable property.
	SECTION 15.  Section 2210.2581, Insurance Code, is amended
	to read as follows:
	Sec. 2210.2581.  MANDATORY COMPLIANCE WITH BUILDING
	STANDARDS; CERTAIN STRUCTURES.  Except as provided by Sections
	[Section] 2210.251(d) and (e) and Section 2210.258(d), and
	notwithstanding Sections 2210.258(a), (b), and (c) [Section
	2210.258] or any other provision of this chapter, on and after
	December 31, 2015, the association may not issue or renew insurance
	coverage for a structure unless the structure complies with the
	applicable building code standards in effect on the date the
	construction, alteration, remodeling, enlargement, or repair of,
	or addition to, the structure begins, as set forth in the plan of
	operation.
	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 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.  Subchapter J, Chapter 2210, Insurance Code, is
	amended by adding Section 2210.4521 to read as follows:
	Sec. 2210.4521.  INVESTMENT OF TRUST FUND BALANCES.
	(a)  The comptroller shall invest in accordance with the investment
	standard described by Section 404.024(j), Government Code, the
	portion of the trust fund balance that exceeds the amount of the
	sufficient balance determined under Subsection (b). The
	comptroller's investment of that portion of the balance is not
	subject to any other limitation or other requirement provided by
	Section 404.024, Government Code.
	(b)  At least once each 12-month period, the board of
	directors shall determine a balance for the trust fund that the
	board considers to be sufficient to meet the cash flow requirements
	of the fund in funding the payment of insured losses as provided by
	Section 2210.452(a).  After determining that sufficient balance,
	the board shall provide notice of the sufficient balance to the
	comptroller.
	(c)  Not later than the 30th day after the date the board of
	directors provides notice of the sufficient balance determined
	under Subsection (b), the comptroller shall adjust the investment
	portfolio of trust fund money to ensure that only the portion of the
	fund that exceeds the sufficient balance is invested as required by
	Subsection (a).
	(d)  The comptroller shall include the fair market value of
	the investment portfolio of the trust fund in calculating the
	amount in the fund for purposes of this chapter.
	SECTION 20.  Section 2210.453, Insurance Code, is amended to
	read as follows:
	Sec. 2210.453.  FUNDING LEVELS; REINSURANCE AND ALTERNATIVE
	RISK FINANCING MECHANISMS. (a)  The association may[:
	[(1)  make payments into the trust fund; and
	[(2)]  purchase reinsurance or use alternative risk
	financing mechanisms or both as necessary.
	(b)  The association shall maintain total available loss
	funding in an amount not less than the probable maximum loss for the
	association for a catastrophe year with a probability of one in 100.
	If necessary, the required funding level shall be achieved through
	the [may] purchase of reinsurance or the use of alternative
	financing mechanisms, or both, to operate [that operates] in
	addition to or in concert with the trust fund, public securities,
	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 21.  Section 2210.602, Insurance Code, is amended by
	amending Subdivision (4) and 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 paying 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 paying Class 2
	public securities are deposited.
	(4)  "Class 3 public securities" means public
	securities authorized to be issued on or after the occurrence of a
	catastrophic event by Section 2210.0741 [2210.074].
	(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 2210.6131 for the purpose of paying Class 3
	public securities are deposited.
	SECTION 22.  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 2210.6131 [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 [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 Section 2210.6131 [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 trust [public security obligation revenue] fund, the Class
	2 public security [premium surcharge] trust fund, or the Class 3
	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 public security trust [public security obligation
	revenue] fund, the Class 2 public security [premium surcharge]
	trust fund, and the Class 3 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 Class 1 public security
	[obligation] trust fund, the Class 2 public security [premium
	surcharge] trust fund, and the Class 3 public security trust fund
	[member assessment trust fund] to the extent provided in the
	proceedings authorizing the credit agreement.
	SECTION 23.  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 2210.6131 [and member
	assessments under Sections 2210.613 and 2210.6135] may be applied
	only as provided by this subchapter.
	SECTION 24.  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
	2210.6131 [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 25.  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 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)  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 26.  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 27.  Subchapter M, Chapter 2210, Insurance Code, is
	amended by adding Sections 2210.6131 and 2210.6132 to read as
	follows:
	Sec. 2210.6131.  PAYMENT OF CLASS 3 PUBLIC SECURITIES.
	(a)  The association shall pay Class 3 public securities issued
	under Section 2210.0741 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.
	(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.
	Sec. 2210.6132.  CONTINGENT SOURCE OF PAYMENT FOR CLASS 2
	AND CLASS 3 PUBLIC SECURITIES. (a)  The commissioner may
	determine, in consultation with the board and the authority, that:
	(1)  the authority is unable to issue Class 2 or Class 3
	public securities to be payable under Section 2210.613 or
	2210.6131, as applicable; or
	(2)  the issuance of Class 2 or Class 3 public
	securities to be payable under Section 2210.613 or 2210.6131, as
	applicable, is financially unreasonable for the association.
	(b)  If the commissioner makes a determination under
	Subsection (a), the commissioner shall order the Class 2 or Class 3
	public securities, as applicable, to be paid by a premium surcharge
	assessed by each insurer, the association, and the Texas FAIR Plan
	Association on all policyholders of policies that are in effect on
	or after the 180th day after the date the commissioner issues the
	order.  The premium surcharge must be set in an amount sufficient
	to pay 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 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.
	SECTION 28.  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
	applicable [member assessment trust fund or 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 29.  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 30.  Chapter 2210, Insurance Code, is amended by
	adding Subchapter O to read as follows:
	SUBCHAPTER O. DEPOPULATION PROGRAM
	Sec. 2210.701.  DEPOPULATION PROGRAM. (a)  The association
	shall administer, subject to commissioner approval, a depopulation
	program that encourages the transfer of association policies to
	insurers through the voluntary market or assumption reinsurance.
	(b)  An insurer engaged in the business of property and
	casualty insurance in this state may elect to participate in the
	depopulation program.
	Sec. 2210.702.  ASSUMPTION REINSURANCE DEPOPULATION.
	(a)  The association shall make available to insurers who elect to
	participate in the depopulation program association policy
	information necessary for the insurers to determine whether to
	reinsure a policy ceded to the insurer by the association. The
	commissioner shall by rule establish the information that is
	necessary to provide to an insurer under this subsection.
	(b)  If an insurer elects to reinsure a policy under this
	section, the reinsurance must be provided as assumption reinsurance
	by novation and the insurer is legally and contractually
	responsible for the association policy ceded to the insurer on the
	effective date of the reinsurance agreement regardless of whether
	the association continues to provide some services on the policy.
	The association is not liable under the policy on and after the
	effective date of the assumption reinsurance agreement. Except as
	specifically provided in an agreement between the association and
	the insurer, the insurer shall administer the policy and process,
	adjust, and pay claims in accordance with the policy.
	(c)  If an insurer elects to provide reinsurance under this
	section, the insurer shall comply with the applicable provisions of
	Chapters 202 and 493.
	Sec. 2210.703.  RENEWAL OF REINSURED POLICIES; COMPARABLE
	COVERAGE. (a)  An insurer electing to offer a policy under Section
	2210.702 shall offer a renewal of that policy to the association
	policyholder for each of the next three years subject to the
	insurer's rate and underwriting guidelines as filed under this
	code.
	(b)  An insurer may not offer a policy to an association
	policyholder under this section unless the policy contains
	generally comparable coverage and premiums to the association
	policy as determined by commissioner rule.  The premiums for a
	policy of generally comparable coverage may not exceed 115 percent
	of the premiums for the association policy.
	(c)  Subchapter L-1 does not apply to a policy renewed under
	this section.
	Sec. 2210.704.  CONFIDENTIALITY OF INFORMATION; USE OF
	POLICYHOLDER'S AGENT. (a)  An insurer may use information
	concerning a specific policy or insured provided by the association
	under Section 2210.702(a) only for the purposes of this subchapter
	and may not use or disclose the information for any other purpose.
	(b)  If an insurer elects to renew a policy for an
	association policyholder identified from information provided to
	the insurer under Section 2210.702, the insurer must offer the
	policy through the insurance agent of record for the association
	policyholder under the prevailing terms, conditions, and
	commissions of the agent.
	(c)  An insurer that offers to renew a policy under Section
	2210.703 shall allow the policyholder's agent to enter into a
	limited service agreement with the insurer for the agent to
	continue to provide services to the policyholder.
	Sec. 2210.705.  TRANSFER OF POLICIES. The commissioner
	shall by rule establish the procedure for the transfer of reinsured
	policies.  The rule must provide that a reinsurance agreement
	include:
	(1)  an offer commencement date of December 1;
	(2)  the opportunity for the policyholder to opt out of
	the reinsurance agreement on or before May 31;
	(3)  a transfer of the earned premium on a reinsured
	policy to a trust account to be held until the expiration of the
	opt-out period described by Subdivision (2) when the earned premium
	for the final reinsured policy will be transferred to the
	reinsurer;
	(4)  a period of not less than 60 days for the agent of
	record to accept an appointment or other written agreement with the
	reinsurer; and
	(5)  any other requirements as the commissioner
	determines necessary for the protection of policyholders and the
	policyholders' agents.
	SECTION 31.  The following provisions of the Insurance Code
	are repealed:
	(1)  Sections 2210.102(g) and (h);
	(2)  Sections 2210.602(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 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
	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 to the new board of
	directors of the Texas Windstorm Insurance Association under
	Section 2210.102, Insurance Code, as amended by this Act.
	(d)  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.  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.
	SECTION 34.  As soon as practicable after the effective date
	of this Act, the board of directors of the Texas Windstorm Insurance
	Association shall propose amendments to the plan of operation of
	the association and the commissioner of insurance shall adopt rules
	to implement Subchapter O, Chapter 2210, Insurance Code, as added
	by this Act.
	SECTION 35.  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.
	______________________________	______________________________
	President of the Senate	Speaker of the House
	I hereby certify that S.B. No. 900 passed the Senate on
	April 27, 2015, by the following vote: Yeas 22, Nays 8; and that
	the Senate concurred in House amendments on May 28, 2015, by the
	following vote: Yeas 24, Nays 7.
	______________________________
	Secretary of the Senate
	I hereby certify that S.B. No. 900 passed the House, with
	amendments, on May 25, 2015, by the following vote: Yeas 97,
	Nays 44, two present not voting.
	______________________________
	Chief Clerk of the House
	Approved:
	______________________________
	Date
	______________________________
	Governor