Enrolled Bill Summary

House Bill 4409	House Author:  Taylor et al.
Effective:  See below	Senate Sponsor:  Jackson, Mike

            House Bill 4409 amends the Government Code to extend the civil liability exemption for a member of the state military forces ordered into active service to an officer or employee of a state or local agency, or a volunteer acting at the direction of such an individual, if the person is performing an activity related to sheltering or housing individuals in connection with the evacuation of an area stricken or threatened by disaster.  The bill requires the division of emergency management in the office of the governor to define "individuals with special needs" in the context of a disaster.  The bill requires the General Land Office and the Texas Department of Transportation to enter into pre-event contracts that may be activated in the event of a weather-related disaster declaration to obtain services for debris removal from beaches and the state highway system and requires those agencies to adopt the contracts not later than January 1, 2010.  The bill requires the Texas Department of Housing and Community Affairs to enter into a similar contract to obtain temporary or emergency housing and authorizes an entity with charge and control of a critical government facility to equip the facility with a combined heating and power system if the expected energy savings exceed the expected costs.

            House Bill 4409 amends Insurance Code provisions relating to the Texas Windstorm Insurance Association Act.  The bill establishes that the primary purpose of the Texas Windstorm Insurance Association (TWIA) is to provide an adequate market for windstorm and hail insurance in the seacoast territory of Texas, specifies that TWIA is intended to serve as a residual insurer of last resort for such insurance in that territory, and removes from its purpose the provision of an adequate market for fire insurance. The bill requires TWIA to function in such a manner as to not be a direct competitor in the private market and to provide windstorm and hail insurance coverage to persons who are unable to obtain insurance coverage in the private market. The bill provides that TWIA is subject to review but not abolishment under the Texas Sunset Act, requires TWIA to be reviewed during the period in which state agencies abolished in 2015 are reviewed, and sets out provisions relating to the determination and payment of costs incurred by the Sunset Advisory Commission in performing the review. The bill provides that these sunset provisions expire September 1, 2015.

            House Bill 4409 requires TWIA's board of directors to submit to the commissioner of insurance, the appropriate committees of each house of the legislature, and the commission a biennial report relating to TWIA's operations during the preceding biennium and sets forth requirements for the report's content. The bill authorizes the commissioner to adopt rules as reasonable and necessary to implement provisions relating to TWIA and removes the requirement for a hearing before such a rule is adopted. The bill requires the Texas Department of Insurance (TDI) to maintain a list of all insurers that engage in the business of property and casualty insurance in the voluntary market in the seacoast territory and to develop incentive programs to encourage authorized insurers to write insurance on a voluntary basis and to minimize the use of TWIA as a means to obtain insurance. The bill amends provisions relating to member participation in TWIA and the use of its assets and establishes that losses not paid from available reserves of TWIA or the catastrophe reserve trust fund are required to be paid with proceeds from public securities issued in accordance with the bill's provisions or with reinsurance. The bill requires these funding sources to be used in a specified order, with any public securities proceeds received in a particular category being used before the proceeds of any public securities in a subsequent category are authorized to be used.

            House Bill 4409 amends provisions relating to the composition, terms, officers, and meetings of TWIA's board of directors and establishes that the board's primary objectives are to ensure that TWIA operates in accordance with the law and commissioner rules, complies with sound insurance principles, and meets applicable standards. The bill abolishes the board, as it existed before amendment by this bill, on December 31, 2009, and requires the commissioner to appoint new board members not later than that date. The bill specifies that the term of a person who is serving as a board member immediately before the board's abolition expires on December 31, 2009, but provides that such a person is eligible for appointment to the new board.

            House Bill 4409 requires TWIA's plan of operation to include procedures for obtaining and repaying amounts under any financial instruments authorized under the act; requires TWIA to make insurance available to each applicant in the catastrophe area whose property is insurable but who, after diligent efforts, is unable to obtain property insurance through the voluntary market, as evidenced by a declination of insurance by certain types of insurers; and requires each application for initial or renewal coverage also to contain a statement that the property and casualty agent submitting the application possesses proof of the declination and proof of flood insurance coverage or unavailability of that coverage. The bill prohibits TWIA, if all or any part of a qualified property is located in Zone V or a similar zone with an additional hazard associated with storm waves, as defined by the National Flood Insurance Program, and if flood insurance under the federal program is available, from issuing an insurance policy for initial coverage unless evidence that the property is covered by a flood insurance policy is submitted to TWIA. The bill requires an agent offering or selling a Texas windstorm and hail insurance policy in any area designated by the commissioner under these provisions to offer flood insurance coverage to the prospective insured if the coverage is available.

            House Bill 4409 amends the requirements for canceling certain coverages; establishes that a nonrefundable surcharge established under the act is not refundable for any reason or purpose; expands the requirements for inspection by TWIA for consideration as insurable property eligible for coverage to include a structure that is altered, remodeled, or enlarged; requires evidence of previous insurance coverage of a structure under such consideration to reflect windstorm and hail coverage for the property within the 12-month period immediately preceding the date of the application for coverage through TWIA; and authorizes a residential structure insured by TWIA as of September 1, 2009, to continue such coverage subject to inspection requirements under provisions relating to mandatory building codes. The bill requires TDI to charge a reasonable fee for each inspection of each structure in an amount set by the commissioner, rather than as established by the board and approved by the commissioner;  requires TDI to monitor TWIA's compliance with provisions relating to such inspections; prohibits TWIA from considering any request that a structure be certified as insurable property unless certain requirements are met; and, if a structure is rejected for coverage, authorizes a new request for certification and a reinspection. The bill makes these provisions applicable to an inspection conducted by TWIA on or after September 1, 2009, and specifies that a structure that has been inspected and is the subject of a certificate of compliance issued by TDI under these provisions as they existed immediately before September 1, 2009, is not required to obtain a new inspection certificate to remain eligible for insurance coverage through TWIA, with certain exceptions.

            House Bill 4409 establishes that, for any structure in a catastrophe area to be eligible for insurance through TWIA, all construction, remodeling, enlargement, and repair of or addition to the structure that is begun on or after the bill's effective date must be performed in compliance with the applicable building code standards, as set forth in the plan of operation. The bill prohibits TWIA from insuring such a structure until the structure has been inspected and a certificate of compliance issued; establishes that a noncompliant residential structure insured by TWIA as of June 1, 2009, that had been approved for insurability under the approval process regulations in effect on that date is subject to a specified annual premium surcharge, which applies to each policy issued or renewed by TWIA on or after the effective date of the bill and is due on the issuance or renewal of the policy; and requires the surcharge to be deposited in the catastrophe reserve trust fund. The bill establishes that the surcharge is a separate nonrefundable charge in addition to the premiums collected and is not subject to premium tax or commissions and provides that failure to pay the surcharge constitutes failure to pay premium for purposes of policy cancellation.

            House Bill 4409 amends provisions relating to rate filings by TWIA and the commissioner's review and approval of such filings, authorizes the consideration of recognized catastrophe models in adopting rates for coverage, authorizes TWIA to establish rating territories and to vary rates among the territories, and authorizes a rating territory that subdivides a county to be used only under certain conditions. The bill removes language establishing that provisions relating to the duties of the State Office of Administrative Hearings and the commissioner in certain rate setting proceedings do not apply to an action taken by the commissioner to accept, modify, or reject a recommendation made by TWIA to reduce coverages or increase deductibles. The bill amends provisions relating to the establishment and use of the catastrophe reserve trust fund; authorizes TWIA to purchase reinsurance that operates in addition to or in concert with public securities, financial instruments, and assessments authorized under the act; and modifies the requirements for funding the mitigation and preparedness plan.

             House Bill 4409 requires the board of directors of the Texas Public Finance Authority, at the request of TWIA and with the approval of the commissioner, to issue Class 1, Class 2, or Class 3 public securities in accordance with and subject to the requirements of Government Code provisions that apply to the issuance of a public security by a state agency. The bill requires TWIA to specify in its request to the finance authority board the maximum principal amount and the maximum term of the public securities and authorizes that amount to be increased to meet certain criteria. The bill requires the finance authority board to determine the terms of issuance of the securities, authorizes the board to enter into a credit agreement in connection with the public securities, and requires the public securities to be issued on behalf of TWIA. The bill authorizes the finance authority board to make additional covenants with respect to the public securities and the designated income and receipts of TWIA pledged to their payment, in addition to other responsibilities. The bill authorizes the public security proceeds to be deposited with the Texas Treasury Safekeeping Trust Company, establishes requirements for their use, and requires excess proceeds to be transferred to the catastrophe reserve trust fund if there are no outstanding public security obligations or public security administrative expenses. The bill provides for the repayment of TWIA's public security obligations and the notification of the finance authority board of the amount of those obligations and the estimated amount of public security administrative expenses, if any; the deposit of collected revenue in the public obligation revenue fund and the use of the revenue; and the payment of amounts owed by the board under a credit agreement.

            House Bill 4409 authorizes revenues received from the premium surcharges to be applied only as specified by these provisions, authorizes TWIA to pay public security obligations with other legally available funds, provides that public security obligations are payable only from sources provided for payment under these provisions, and sets out requirements for the payment of public securities from each source.

            House Bill 4409 authorizes TWIA to request the finance authority board to refinance any public securities issued under these provisions with public securities payable from the same sources as the original public securities, establishes that a public security or credit agreement is payable solely from revenue, and specifies that a public security issued under these provisions, and any related credit agreement, is not a state debt. The bill sets forth the disclosure information that must appear on the face of each public security and any related credit agreement and prohibits the state, if public securities under these provisions are outstanding, from limiting or restricting the rights of TWIA to fulfill its responsibility to pay public security obligations or to impair the rights and remedies of the public security owners until the public securities are fully discharged. The bill establishes that a writ of mandamus and any other legal and equitable remedies are available to a party at interest to require TWIA or another party to fulfill certain agreements and to perform certain functions and duties. The bill exempts from state and local taxes a public security issued under these provisions, any related transaction, and profits made from the sale of the public security; exempts TWIA members, board members, employees, and certain other individuals and entities from personal liability as a result of exercising the rights and responsibilities granted under these provisions; and sets forth the statutory provisions under which public securities are considered authorized investments.

            House Bill 4409 establishes the windstorm insurance legislative oversight board, sets forth the composition of the board and its powers and duties, and requires the board to report biennially to the governor, the lieutenant governor, and the speaker of the house of representatives on the board's activities and other specified matters. The bill specifies that a Lloyd's plan and a reciprocal and interinsurance exchange are subject to the act. The bill repeals provisions relating to the deletion of insurance coverages available through TWIA and to insurance coverage for certain governmental entities. The bill also repeals provisions relating to uniform rate requirements, the use of certain surcharges in developing rates, the effect on rates of certain other insurance coverages, and the Windstorm Building Code Advisory Committee.

            House Bill 4409 requires the commissioner of insurance to adopt rules as required by these provisions as soon as possible after the effective date of the bill, but not later than the 30th day after that date. The bill requires TWIA, through its board of directors, to propose to the commissioner amendments to TWIA's plan of operation not later than March 1, 2010.

            The bill takes effect June 19, 2009, except the Government Code provisions, which take effect September 1, 2009.