84R29798 PMO-D
	By: Taylor of Galveston, et al.	S.B. No. 900
	(Bonnen of Galveston)
	Substitute the following for S.B. No. 900:  No.

	A BILL TO BE ENTITLED
	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 Coastal
	[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. [(b)]
	The association shall pay losses in excess of premium and other
	revenue of the association from available reserves of the
	association and available amounts in the catastrophe reserve trust
	fund.
	[(c)     Losses not paid under Subsection (b) shall be paid from
	the proceeds from public securities issued in accordance with this
	subchapter and Subchapter M and, notwithstanding Subsection (a),
	may be paid from the proceeds of public securities issued under
	Section 2210.072(a) before an occurrence or series of occurrences
	that results in insured losses.]
	SECTION 6.  Section 2210.072, Insurance Code, is amended to
	read as follows:
	Sec. 2210.072.  PAYMENT FROM CLASS 1 PUBLIC SECURITIES
	ISSUED BEFORE JUNE 1, 2015[; 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 on or before June 1, 2015 [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 repaid within a period not to exceed 14 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) 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 $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 $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)  Public [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 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 $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 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 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)  may 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 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 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 represent [be a
	representative of] an area of this state that is [not] located more
	than 200 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.
	(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 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.  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 15.  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 16.  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 not less than 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 17.  Section 2210.501, Insurance Code, is amended by
	adding Subsection (d) to read as follows:
	(d)  Notwithstanding Section 2210.502, maximum liability
	limits for coverage described by Subsection (b)(1) or (3) may not
	exceed $1,500,000.
	SECTION 18.  Section 2210.602, Insurance Code, is amended by
	amending Subdivision (4) and adding Subdivisions (3-a) and (4-a) to
	read as follows:
	(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 19.  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 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 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 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 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 20.  Section 2210.610(a), Insurance Code, is amended
	to read as follows:
	(a)  Revenues received from the premium surcharges under
	Sections [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 21.  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 [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 22.  Section 2210.613, Insurance Code, is amended to
	read as follows:
	Sec. 2210.613.  PAYMENT OF CLASS 2 PUBLIC SECURITIES. (a)
	The association shall pay Class 2 public securities issued under
	Section 2210.073 from:
	(1)  net premium and other revenue; and
	(2)  if net premium and other revenue are not
	sufficient to pay the securities, a catastrophe area premium
	surcharge collected in accordance with this section.
	(b)  On approval by the commissioner, the association 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 23.  Subchapter M, Chapter 2210, Insurance Code, is
	amended by adding Section 2210.6131 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 2210.073 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.
	(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.
	SECTION 24.  Section 2210.616(a), Insurance Code, is amended
	to read as follows:
	(a)  The state pledges for the benefit and protection of
	financing parties, the board, and the association that the state
	will not take or permit any action that would:
	(1)  impair the collection of [member assessments and]
	premium surcharges or the deposit of those funds into the
	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 25.  Section 2210.6165, Insurance Code, is amended
	to read as follows:
	Sec. 2210.6165.  PROPERTY RIGHTS.  If public securities
	issued under this subchapter are outstanding, the rights and
	interests of the association, a successor to the association, any
	member of the association, or any member of the Texas FAIR Plan
	Association, including the right to impose, collect, and receive a
	premium surcharge [or a member assessment] authorized under this
	subchapter, are only contract rights until those revenues are first
	pledged for the repayment of the association's public security
	obligations as provided by Section 2210.609.
	SECTION 26.  The following provisions of the Insurance Code
	are repealed:
	(1)  Sections 2210.602(5-a), (6), (6-b), and (6-c);
	(2)  Section 2210.605(c); and
	(3)  Sections 2210.6135 and 2210.6136.
	SECTION 27.  (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 28.  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.