Rep. Todd Hunter (R-Corpus Christi) and Sen. Juan Hinojosa (D-McAllen) have filed legislation overhauling the governing body and financing structure of the Texas Windstorm Insurance Association. HB 696/SB 302:
—Requires payment of excess losses from Class 1 assessments of TWIA members (not to exceed $500 million in a catastrophe year);
—Provides that losses above the assessment amount may be paid from 10-year public securities (not to exceed $500 million in a catastrophe year, less depletion of previously issued public securities);
—Provides that losses above that amount may be paid from Class 2 assessments of TWIA members (not to exceed $500 million), followed by another $500 million in Class 2 public securities if necessary; if losses still exceed amounts raised through assessments and public securities, the bill authorizes an additional $1 billion in Class 3 public securities;
—Changes the TWIA board from commissioner to gubernatorial appointment; reduces the number of insurance industry representatives from 4 to 3 and requires them to actively write or renew windstorm policies on the coast
—Reduces the number of members from Tier 1 coastal counties from 4 to 3 and distributes those members from the upper to the lower coast;
—Requires one member to be a construction engineer from a Tier 2 coastal county and one member to be a representative of the financial industry from a Tier 2 coastal county;
—Effective 1/1/16, requires an applicant for new association coverage who currently has private coverage to provide information regarding existing coverage;
—Requires TWIA to reduces its exposure by 20% in 2018, 35% in 2020, 45% in 2022, 55% in 2024, and 60% in 2026;
—If it doesn’t meet these levels, requires TWIA to take steps, including the imposition of assessments of up to $200 million, to achieve them;
—Prohibits a member insurer from recouping exposure reduction assessments through premium surcharges or tax credits;
—Requires the commissioner to submit semi-annual reports to a legislative oversight committee detailing the amount of TWIA’s total insured exposure and other information;
—Requires TWIA annually to set aside 30% of the association’s earned premium for the prior year for deposit into a reserve trust fund;
—Authorizes TWIA to use up to $1 billion in alternative risk financing mechanisms and to purchase additional reinsurance via member assessment of the lesser of $800 million or an amount sufficient to fund a probably maximum lost for a catastrophe year with a probability of 1 in 100;
—Allows an insurer with primary coverage on property loss by fire to adjust all claims made on an association policy covering the same property;
—Authorizes TWIA to repay Class 1, 2, and 3 public securities with a statewide premium surcharge on property & casualty lines, if net premium and other revenue are not sufficient; and
—Abolishes the old TWIA board effective 11/1/15 and requires the governor to appoint a new board effective on that date.