By: Oliverson, et al. (Senate Sponsor - Middleton)	H.B. No. 1588
	(In the Senate - Received from the House May 3, 2023;
	May 4, 2023, read first time and referred to Committee on Business &
	Commerce; May 18, 2023, reported adversely, with favorable
	Committee Substitute by the following vote:  Yeas 9, Nays 0;
	May 18, 2023, sent to printer.)
Click here to see the committee vote
	COMMITTEE SUBSTITUTE FOR H.B. No. 1588	By:  Middleton

	A BILL TO BE ENTITLED
	AN ACT
	relating to funding of excess losses and operating expenses of the
	Texas Windstorm Insurance Association; authorizing an assessment;
	authorizing a surcharge.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	ARTICLE 1. FUNDING OF INSURED LOSSES AND OPERATING EXPENSES OF
	TEXAS WINDSTORM INSURANCE ASSOCIATION
	SECTION 1.01.  Section 404.0241, Government Code, is amended
	by amending Subsections (b-2), (b-4), and (b-5) and adding
	Subsections (f), (g), and (h) to read as follows:
	(b-2)  A person may not bring a civil action against this
	state, the Texas Treasury Safekeeping Trust Company, or an
	employee, independent contractor, or official of this state,
	including the comptroller, for any claim, including breach of
	fiduciary duty or violation of any constitutional, statutory, or
	regulatory requirement, in connection with any action, inaction,
	decision, divestment, investment, report, or other determination
	made or taken in connection with this section [Subsections (b-1),
	(b-4), and (b-5)].
	(b-4)  The comptroller shall manage the investments
	described [required] by Subsections [Subsection] (b-1) and (g) as
	[a] separate investment portfolios [portfolio].  The comptroller
	shall provide separate accounting and reporting for the investments
	in each of those portfolios [that portfolio].  The comptroller
	shall credit to each [that] portfolio all payments, distributions,
	interest, and other earnings on the investments in that portfolio.
	(b-5)  The comptroller has any power necessary to accomplish
	the purposes of managing and investing the assets of a [the]
	portfolio described by Subsection (b-4). In managing the assets of
	that portfolio, through procedures and subject to restrictions the
	comptroller considers appropriate, the comptroller may acquire,
	sell, transfer, or otherwise assign the investments as appropriate,
	taking into consideration the purposes, terms, distribution
	requirements, and other circumstances of that portfolio then
	prevailing.
	(f)  Notwithstanding any other law, directly or indirectly
	through a separately managed account or other investment vehicle,
	the comptroller may invest an amount not to exceed $1 billion of the
	economic stabilization fund balance in accordance with this section
	and Chapter 2210, Insurance Code.
	(g)  For purposes of Subsection (f), the comptroller may
	enter into an investment arrangement with the Texas Windstorm
	Insurance Association to provide the association an amount not to
	exceed $1 billion in funding for each catastrophe year in
	accordance with Subchapter M-1, Chapter 2210, Insurance Code, after
	a catastrophic event to fund the association's losses and
	operational expenses arising from the catastrophic event in excess
	of the association's premium and other revenue, available reserves,
	the catastrophe reserve trust fund, and member assessments
	authorized under Section 2210.083.
	(h)  An investment arrangement entered into under Subsection
	(g):
	(1)  must be secured and repaid by catastrophe
	surcharges under Subchapter M-2, Chapter 2210, Insurance Code;
	(2)  must include interest at a rate equal to the
	three-year United States treasury note rate plus at least four
	percent; and
	(3)  may not exceed 36 months to maturity.
	SECTION 1.02.  Section 2210.0081, Insurance Code, is amended
	to read as follows:
	Sec. 2210.0081.  CERTAIN ACTIONS BROUGHT AGAINST
	ASSOCIATION BY COMMISSIONER.  In an action brought by the
	commissioner against the association under Chapter 441:
	(1)  the association's inability to satisfy obligations
	under Subchapter M or M-1 related to the issuance of public
	securities under this chapter or an investment arrangement with
	this state, as applicable, constitutes a condition that makes the
	association's continuation in business hazardous to the public or
	to the association's policyholders for the purposes of Section
	441.052;
	(2)  the time for the association to comply with the
	requirements of supervision or for the conservator to complete the
	conservator's duties, as applicable, is limited to three years from
	the date the commissioner commences the action against the
	association; and
	(3)  unless the commissioner takes further action
	against the association under Chapter 441, as a condition of
	release from supervision, the association must demonstrate to the
	satisfaction of the commissioner that the association is able to
	satisfy obligations under Subchapter M or M-1 related to the
	issuance of public securities under this chapter or an investment
	arrangement with this state, as applicable.
	SECTION 1.03.  The heading to Subchapter B-1, Chapter 2210,
	Insurance Code, is amended to read as follows:
	SUBCHAPTER B-1. PAYMENT OF LOSSES INCURRED BEFORE JANUARY 1, 2024
	SECTION 1.04.  Subchapter B-1, Chapter 2210, Insurance Code,
	is amended by adding Section 2210.070 to read as follows:
	Sec. 2210.070.  APPLICABILITY OF SUBCHAPTER. (a) This
	subchapter applies only to the payment of losses and operating
	expenses of the association for a catastrophe year that occurs
	before January 1, 2024, and results in excess losses and operating
	expenses incurred by the association before January 1, 2024.
	(b)  Payment of excess losses and operating expenses of the
	association incurred after December 31, 2023, shall be paid as
	provided by Subchapter B-2.
	SECTION 1.05.  Section 2210.071(a), Insurance Code, is
	amended to read as follows:
	(a)  If, in a catastrophe year before January 1, 2024, 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.
	SECTION 1.06.  Section 2210.0715(b), Insurance Code, is
	amended to read as follows:
	(b)  Proceeds of public securities issued, an investment
	arrangement entered into, or assessments made before January 1,
	2024, or as a result of any occurrence or series of occurrences in a
	catastrophe year that occurs before January 1, 2024, and results in
	insured losses before that date may not be included in reserves
	available for a subsequent catastrophe year for purposes of this
	section or Section 2210.082 unless approved by the commissioner.
	SECTION 1.07.  The heading to Section 2210.075, Insurance
	Code, is amended to read as follows:
	Sec. 2210.075.  REINSURANCE BY MEMBERS.
	SECTION 1.08.  Subchapter B-1, Chapter 2210, Insurance Code,
	is amended by adding Section 2210.076 to read as follows:
	Sec. 2210.076.  PAYMENT FROM STATE INVESTMENT ARRANGEMENTS.
	(a)  Notwithstanding the provisions of this subchapter to the
	contrary, the association may pay losses the association would
	otherwise pay as provided by Section 2210.072, 2210.073, or
	2210.0741 by entering into one or more investment arrangements with
	this state as provided by Subchapter M-1 of this chapter and Section
	404.0241, Government Code.
	(b)  Subchapter M-2 applies to the financing of losses under
	this section to the extent necessary to secure and repay a debt
	obligation to the state under an investment arrangement entered
	into with this state under this section.
	(c)  An investment arrangement described by Subsection (a)
	may also be used for a purpose described by Section 2210.072(d) in
	the same manner as a financing arrangement with a market source.
	SECTION 1.09.  Chapter 2210, Insurance Code, is amended by
	adding Subchapter B-2 to read as follows:
	SUBCHAPTER B-2. PAYMENT OF EXCESS LOSSES AND OPERATING EXPENSES
	Sec. 2210.080.  APPLICABILITY OF SUBCHAPTER. (a)  This
	subchapter applies only to the payment of losses and operating
	expenses of the association for a catastrophe year that occurs
	after December 31, 2023, and results in excess losses and operating
	expenses incurred by the association after December 31, 2023.
	(b)  This section expires September 1, 2025.
	Sec. 2210.081.  PAYMENT OF EXCESS LOSSES. (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.
	(b)  The association may not pay insured losses and operating
	expenses resulting from an occurrence or series of occurrences in a
	catastrophe year with premium and other revenue earned in a
	subsequent year.
	Sec. 2210.082.  PAYMENT FROM RESERVES AND TRUST FUND. (a)
	The association shall pay insured losses and operating expenses
	resulting from an occurrence or series of occurrences in a
	catastrophe year in excess of premium and other revenue of the
	association for that catastrophe year from reserves of the
	association available before or accrued during that catastrophe
	year and amounts in the catastrophe reserve trust fund available
	before or accrued during that catastrophe year.
	(b)  Proceeds of public securities issued or assessments
	made before or as a result of any occurrence or series of
	occurrences in a catastrophe year that results in insured losses
	may not be included in reserves available for a subsequent
	catastrophe year for purposes of this section.
	Sec. 2210.083.  PAYMENT FROM MEMBER ASSESSMENTS. (a)
	Insured losses and operating expenses for a catastrophe year not
	paid under Section 2210.082 shall be paid as provided by this
	section from member assessments not to exceed $1 billion for that
	catastrophe year.
	(b)  The board of directors shall notify each association
	member of the amount of the member's assessment under this section.
	The proportion of the insured losses and operating expenses
	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)  An association member may not recoup an assessment paid
	under this section through a premium surcharge or tax credit.
	Sec. 2210.084.  PAYMENT FROM STATE INVESTMENT ARRANGEMENTS.
	For insured losses and operating expenses for a catastrophe year
	not paid under Section 2210.082 or 2210.083, the association shall
	enter into one or more investment arrangements totaling not more
	than $1 billion with the state as provided by Subchapter M-1 of this
	chapter and Section 404.0241, Government Code.
	Sec. 2210.085.  PAYMENT FROM PUBLIC SECURITIES. (a)
	Insured losses and operating expenses for a catastrophe year not
	paid under Section 2210.082, 2210.083, or 2210.084 shall be paid
	from the proceeds from public securities 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 this section must be paid within a period
	not to exceed 14 years and may be paid sooner if the board of
	directors elects to do so and the commissioner approves.
	(b)  Public securities described by Subsection (a) that are
	issued before an occurrence or series of occurrences that results
	in incurred losses:
	(1)  may be issued on the request of the board of
	directors with the approval of the commissioner; and
	(2)  may not, in the aggregate, exceed $1 billion at any
	one time, regardless of the calendar year or years in which the
	outstanding public securities were issued.
	(c)  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 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.
	(d)  If public securities are issued as described by this
	section, the public securities shall be repaid in the manner
	prescribed by Subchapter M.
	(e)  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.
	(f)  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 public securities issued on or before December 31,
	2023, 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.
	(g)  If, under Subsection (f), the proceeds of any
	outstanding public securities issued during a previous catastrophe
	year, together with the proceeds of any outstanding public
	securities issued on or before December 31, 2023, must be depleted,
	those proceeds shall count against the limit on public securities
	described by this section in the catastrophe year in which the
	proceeds must be depleted.
	Sec. 2210.086.  REINSURANCE BY MEMBERS FOR MEMBER
	ASSESSMENTS. (a) Before any occurrence or series of occurrences,
	an association member may purchase reinsurance to cover an
	assessment for which the member would otherwise be liable under
	this subchapter.
	(b)  An association member must notify the board of
	directors, in the manner prescribed by the association, whether the
	member will be purchasing reinsurance. If the member does not
	purchase reinsurance under this section, the member remains liable
	for any assessment imposed under this subchapter.
	SECTION 1.10.  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 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)  payment of obligations related to an investment
	arrangement with this state under Subchapter M-1 of this chapter
	and Section 404.0241, Government Code, including the additional
	amount of any related debt service determined by the association to
	be required for the investment arrangement; and
	(6)  all other relevant factors, within and outside
	this state.
	SECTION 1.11.  Section 2210.452(b), Insurance Code, is
	amended to read as follows:
	(b)  All money, including investment income, deposited in
	the trust fund constitutes state funds until disbursed as provided
	by this chapter and commissioner rules. The comptroller shall hold
	the money outside the state treasury on behalf of, and with legal
	title in, the department on behalf of the association. The
	department shall keep and maintain the trust fund in accordance
	with this chapter and commissioner rules. The comptroller, as
	custodian of the trust fund, shall administer the trust fund
	strictly and solely as provided by this chapter and commissioner
	rules. The association may include the amounts held in the
	catastrophe reserve trust fund as an admitted asset in the
	financial statements of the association.
	SECTION 1.12.  Section 2210.4521(a), Insurance Code, is
	amended to read as follows:
	(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. The Texas Treasury Safekeeping
	Trust Company and board of directors may recommend investments to
	protect the trust fund and create investment income.
	SECTION 1.13.  Section 2210.453, Insurance Code, is amended
	by adding Subsection (a-1) to read as follows:
	(a-1)  The association may obtain reinsurance at any level
	including excess of loss, quota share, and other forms of
	reinsurance to protect the solvency and viability of the
	association. The commissioner may consult with the board of
	directors regarding methods to protect the solvency and continued
	viability of the association, including by protecting the minimum
	balance, acquiring reinsurance, or by other means.
	SECTION 1.14.  Subchapter J, Chapter 2210, Insurance Code,
	is amended by adding Section 2210.4531 to read as follows:
	Sec. 2210.4531.  DETERMINATION OF PROBABLE MAXIMUM LOSS.
	(a) The association shall file with the department a proposed
	probable maximum loss, subject to Section 2210.453.
	(b)  In determining the probable maximum loss, the
	association:
	(1)  shall, to the extent possible, contract with any
	disinterested third parties necessary to execute any catastrophe
	models that were executed in the preceding storm season;
	(2)  shall, if the association is unable to contract
	for the execution of a catastrophe model described by Subdivision
	(1), contract with any disinterested third party necessary to
	execute a catastrophe model that is substantially similar to the
	model for which the association is unable to contract under
	Subdivision (1);
	(3)  may contract with any disinterested third parties
	to execute catastrophe models in addition to the models required
	under Subdivisions (1) and (2);
	(4)  shall provide to a disinterested third party
	executing a catastrophe model any information necessary to comply
	with this subsection;
	(5)  may not use a combination of catastrophe models to
	determine the probable maximum loss; and
	(6)  may use only the catastrophe model that produces
	the lowest probable maximum loss.
	(c)  The association shall make any information produced in
	compliance with Subsection (b) publicly available on the
	association's Internet website.
	(d)  The association may only use a probable maximum loss
	that is approved by the commissioner. The commissioner may reject a
	probable maximum loss filed with the department by the association
	and set a probable maximum loss at any amount determined by the
	commissioner.
	SECTION 1.15.  Effective January 1, 2024, Section 2210.602,
	Insurance Code, is amended by amending Subdivision (7) and adding
	Subdivision (12) to read as follows:
	(7)  "Public security" means a debt instrument or other
	public security authorized to be issued under Section 2210.085 and
	issued by the Texas Public Finance Authority, including a
	commercial paper program authorized before the occurrence of a
	catastrophic event.
	(12)  "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 public securities
	are deposited.
	SECTION 1.16.  Effective January 1, 2024, Section
	2210.604(a), Insurance Code, is amended to read as follows:
	(a)  In accordance with and subject to the limitations
	provided by Section 2210.085, at [At] the request of the
	association and with the approval of the commissioner, the Texas
	Public Finance Authority shall issue [Class 1, Class 2, or Class 3]
	public securities.  The association shall submit to the
	commissioner a cost-benefit analysis of various financing methods
	and funding structures when requesting the issuance of public
	securities under this subsection.
	SECTION 1.17.  Effective January 1, 2024, Sections
	2210.608(a) and (c), Insurance Code, are amended to read as
	follows:
	(a)  Public security proceeds, including investment income,
	shall be held in trust for the exclusive use and benefit of the
	association.  The association may use the proceeds to:
	(1)  pay incurred claims and operating expenses of the
	association in accordance with Section 2210.085;
	(2)  purchase reinsurance for the association;
	(3)  pay the costs of issuing the public securities,
	and public security administrative expenses, if any;
	(4)  provide a public security reserve;
	(5)  pay capitalized interest and principal on the
	public securities for the period determined necessary by the
	association;
	(6)  pay private financial agreements entered into by
	the association as temporary sources of payment of losses and
	operating expenses of the association; and
	(7)  reimburse the association for any cost described
	by Subdivisions (1)-(6) paid by the association before issuance of
	the public securities.
	(c)  Notwithstanding Subsection (a)(2), the proceeds from
	public securities issued under Section 2210.085 [2210.072] before
	an occurrence or series of occurrences that results in incurred
	losses, including investment income, may not be used to purchase
	reinsurance for the association.
	SECTION 1.18.  Effective January 1, 2024, Sections
	2210.609(a), (c), (d), and (e), Insurance Code, are amended to read
	as follows:
	(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.  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 Section [Sections]
	2210.612[, 2210.613, and 2210.6131 as applicable].  Public [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].
	(c)  The association shall deposit all revenue collected
	under Section 2210.612 in the [Class 1] public security trust fund
	[, all revenue collected under Section 2210.613 in the Class 2
	public security trust fund, and all revenue collected under Section
	2210.6131 in the Class 3 public security trust fund].  Money
	deposited in the [a] fund may be invested as permitted by general
	law.  Money in the [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 fund [, the Class 2 public security trust fund, or
	the Class 3 public security 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,
	premium surcharges, and amounts on deposit in the [Class 1] public
	security trust fund, [the Class 2 public security trust fund, and
	the Class 3 public security 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 from the [Class 1] public security trust fund [,
	the Class 2 public security trust fund, and the Class 3 public
	security trust fund] to the extent provided in the proceedings
	authorizing the credit agreement.
	SECTION 1.19.  Effective January 1, 2024, Section
	2210.610(a), Insurance Code, is amended to read as follows:
	(a)  Revenues received from the premium surcharges under
	Section [Sections] 2210.612[, 2210.613, and 2210.6131] may be
	applied only as provided by this subchapter.
	SECTION 1.20.  Effective January 1, 2024, 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 Section [Sections] 2210.612 [, 2210.613, and
	2210.6131] 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 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 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 1.21.  Effective January 1, 2024, the heading to
	Section 2210.612, Insurance Code, is amended to read as follows:
	Sec. 2210.612.  PAYMENT OF [CLASS 1] PUBLIC SECURITIES.
	SECTION 1.22.  Effective January 1, 2024, Sections
	2210.612(a) and (e), Insurance Code, are amended to read as
	follows:
	(a)  The association shall pay [Class 1] public securities
	issued under Section 2210.085 [2210.072] 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.
	(e)  The association may enter financing arrangements as
	described by Section 2210.085(e) [2210.072(d)] as necessary to
	obtain public securities issued under Section 2210.085 [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 2210.085(a) [2210.072(a)].
	SECTION 1.23.  Effective January 1, 2024, the heading to
	Section 2210.6132, Insurance Code, is amended to read as follows:
	Sec. 2210.6132.  CONTINGENT SOURCE OF PAYMENT FOR [CLASS 2
	AND CLASS 3] PUBLIC SECURITIES.
	SECTION 1.24.  Effective January 1, 2024, Sections
	2210.6132(a) and (b), Insurance Code, are amended to read as
	follows:
	(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 2210.612 [2210.613
	or 2210.6131, as applicable]; or
	(2)  the issuance of [Class 2 or Class 3] public
	securities to be payable under Section 2210.612 [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.
	SECTION 1.25.  Effective January 1, 2024, Section 2210.614,
	Insurance Code, is amended to read as follows:
	Sec. 2210.614.  REFINANCING PUBLIC SECURITIES.  The
	association may request the board to refinance any public
	securities issued in accordance with Section 2210.085 [Subchapter
	B-1, whether Class 1, Class 2, or Class 3 public securities,] with
	public securities payable from the same sources as the original
	public securities.
	SECTION 1.26.  Chapter 2210, Insurance Code, is amended by
	adding Subchapters M-1 and M-2 to read as follows:
	SUBCHAPTER M-1. STATE CATASTROPHE INVESTMENT ARRANGEMENTS
	Sec. 2210.631.  STATE CATASTROPHE INVESTMENT ARRANGEMENTS.
	The legislature has determined that providing catastrophe
	investment arrangements to the association by permitting the
	association to enter into those arrangements with this state is an
	acceptable use of state money and provides an efficient method for
	the association to pay losses following a catastrophic event.
	Sec. 2210.632.  CATASTROPHE INVESTMENT ARRANGEMENT
	AUTHORIZED; LIMITS.  The association may enter into an investment
	arrangement with this state as provided by Section 404.0241,
	Government Code, for not more than $1 billion after a catastrophic
	event that depletes the catastrophe reserve fund and member
	assessments imposed under Section 2210.083.
	SUBCHAPTER M-2. CATASTROPHE SURCHARGE
	Sec. 2210.641.  DEFINITION. In this subchapter,
	"catastrophic event" means an occurrence or a series of occurrences
	that:
	(1)  occurs in a catastrophe area during a calendar
	year; and
	(2)  results in insured losses and operating expenses
	of the association in excess of premium and other revenue of the
	association.
	Sec. 2210.642.  APPLICABILITY OF SUBCHAPTER. (a)
	Notwithstanding Section 2210.006, this subchapter applies to an
	insurer that is:
	(1)  an insurer authorized to engage in the business of
	insurance in this state that is required to be a member of the
	association, including a farm mutual insurance company that is a
	fronting insurer as defined by Section 221.001(c);
	(2)  a farm mutual insurance company that is not a
	fronting insurer as defined by Section 221.001(c) only for purposes
	of the collection of surcharges authorized by this subchapter;
	(3)  an unaffiliated eligible surplus lines insurer
	writing the lines of business subject to a premium surcharge under
	this subchapter;
	(4)  the association; and
	(5)  the FAIR Plan Association.
	(b)  A premium surcharge under this subchapter applies to:
	(1)  a policy written under the following lines of
	insurance:
	(A)  fire and allied lines;
	(B)  farm and ranch owners; and
	(C)  residential property insurance; and
	(2)  the property insurance portion of a commercial
	multiple peril insurance policy.
	Sec. 2210.6425.  CONSTRUCTION OF SUBCHAPTER. (a) This
	subchapter may not be construed to require an insurer to be an
	association member if the insurer is not otherwise required to be a
	member under Section 2210.052.
	(b)  A farm mutual insurance company that is not a fronting
	insurer as defined by Section 221.001(c) is not a member of the
	association as a result of the company's collection of surcharges
	authorized by this subchapter or for any other reason.
	Sec. 2210.643.  ANNUAL FINANCIAL REPORT BY COMMISSIONER.
	The commissioner shall determine the amount available in the
	catastrophe reserve trust fund as of December 31 of each year and
	provide a written report to the governor, lieutenant governor, and
	speaker of the house of representatives that includes:
	(1)  the amount available in the catastrophe reserve
	trust fund; and
	(2)  information regarding the current financial
	condition of the association.
	Sec. 2210.6435.  CATASTROPHE SURCHARGES. (a) The
	commissioner, in consultation with the board of directors, may
	order a catastrophe surcharge effective on the closing date of an
	investment arrangement with this state and as provided by this
	subchapter only if, after a catastrophic event:
	(1)  the commissioner determines that the association
	has depleted its reserves, other money, the catastrophe reserve
	trust fund, and member assessments in the amount of $1 billion
	imposed under Section 2210.083; and
	(2)  the association intends to enter into an
	investment arrangement with this state under Subchapter M-1 that is
	the basis for the surcharge.
	(b)  The commissioner, in consultation with the board of
	directors, shall set the catastrophe surcharge as a percentage of
	premium to be collected by each insurer to which this subchapter
	applies.
	(c)  The total amount authorized to be collected under this
	section for any catastrophe surcharge may not exceed the amount
	needed to satisfy the terms of the investment arrangement entered
	into with this state under Subchapter M-1 that is the basis for the
	surcharge.
	(d)  The catastrophe surcharge percentage must be set in an
	amount sufficient, including a reserve amount, to satisfy the terms
	of the investment arrangement entered into with this state under
	Subchapter M-1 that is the basis for the surcharge.  The
	commissioner shall review the catastrophe surcharge percentage
	semiannually and adjust the percentage as necessary to ensure
	amounts collected will be sufficient to satisfy the terms of the
	investment arrangement.  The association will provide a semiannual
	report to the commissioner and comptroller in the form and manner
	prescribed by the commissioner of the premium assessed and
	collected and its sufficiency to satisfy the terms of the
	investment arrangement.  The commissioner may set the surcharge as
	a percentage of premium to collect the needed aggregate amount over
	a period of time not to exceed three years.
	(e)  A catastrophe surcharge authorized under this section
	shall be assessed by insurers on all policyholders of policies that
	are subject to this subchapter.
	(f)  A catastrophe surcharge under this subchapter is a
	separate charge in addition to the premiums collected and is not
	subject to premium tax or commissions.
	(g)  Failure by a policyholder to pay a catastrophe surcharge
	constitutes failure to pay premium for purposes of policy
	cancellation.
	(h)  A catastrophe surcharge is not refundable if the policy
	is canceled or terminated.
	Sec. 2210.644.  CATASTROPHE SURCHARGE PROCEEDS. The
	proceeds of a catastrophe surcharge authorized under this
	subchapter shall be deposited into the catastrophe reserve trust
	fund or an account designated by the comptroller for purposes of
	satisfying the terms of the investment arrangement that is the
	basis for the surcharge, and the proceeds shall be paid to this
	state under the terms of the investment arrangement until the terms
	are fully satisfied.
	Sec. 2210.6445.  DISCLOSURE OF SURCHARGE. Each policy that
	is assessed a surcharge under this subchapter shall contain the
	following prominent disclosure in the documents attached to the
	policy:
	"A CATASTROPHE SURCHARGE HAS BEEN INCLUDED ON YOUR POLICY.
	THIS SURCHARGE WILL BE USED TO REPAY STATE MONEY USED BY THE TEXAS
	WINDSTORM INSURANCE ASSOCIATION TO PAY FOR LOSSES AFTER A
	CATASTROPHIC EVENT, INCLUDING A HURRICANE. THE SURCHARGE IS NOT
	REFUNDABLE IF YOU CANCEL OR TERMINATE THIS POLICY."
	Sec. 2210.645.  EXEMPTION FROM TAXATION. A surcharge
	collected under this subchapter is exempt from taxation by this
	state or a municipality or other political subdivision of this
	state.
	Sec. 2210.6455.  LIMITATION OF PERSONAL LIABILITY. The
	association members, the insurers required to collect a surcharge
	under this subchapter, members of the board of directors,
	association employees, the commissioner, and department employees
	are not personally liable as a result of exercising the rights and
	responsibilities granted under this subchapter.
	Sec. 2210.646.  EXEMPTION FROM SURCHARGE. An insurer may
	not collect a surcharge authorized under this subchapter on any
	policy issued to this state, an agency of this state, or a political
	subdivision of this state.
	SECTION 1.27.  (a) Effective January 1, 2024, the following
	provisions of the Insurance Code are repealed:
	(1)  Sections 2210.602(2), (2-a), (3), (3-a), (4), and
	(4-a);
	(2)  Section 2210.613; and
	(3)  Section 2210.6131.
	(b)  Effective September 1, 2025, Subchapter B-1, Chapter
	2210, Insurance Code, is repealed.
	SECTION 1.28.  As soon as practicable after the effective
	date of this Act and not later than December 1, 2023, the
	commissioner of insurance shall adopt rules necessary to implement
	Subchapter M, Insurance Code, as amended by this Act, and
	Subchapters B-2 and M-2, Insurance Code, as added by this Act.
	ARTICLE 2. CONFORMING AMENDMENTS
	SECTION 2.01.  (a) Section 2210.056(b), Insurance Code, is
	amended to read as follows:
	(b)  The association's assets may not be used for or diverted
	to any purpose other than to:
	(1)  satisfy, in whole or in part, the liability of the
	association on claims made on policies written by the association;
	(2)  make investments authorized under applicable law;
	(3)  pay reasonable and necessary administrative
	expenses incurred in connection with the operation of the
	association and the processing of claims against the association;
	(4)  satisfy, in whole or in part, the obligations of
	the association incurred in connection with Subchapters B-1, B-2,
	J, [and] M, and M-2, including reinsurance, public securities, and
	financial instruments; or
	(5)  make remittance under the laws of this state to be
	used by this state to:
	(A)  pay claims made on policies written by the
	association;
	(B)  purchase reinsurance covering losses under
	those policies; or
	(C)  prepare for or mitigate the effects of
	catastrophic natural events.
	(b)  Effective September 1, 2025, Section 2210.056(b),
	Insurance Code, is amended to read as follows:
	(b)  The association's assets may not be used for or diverted
	to any purpose other than to:
	(1)  satisfy, in whole or in part, the liability of the
	association on claims made on policies written by the association;
	(2)  make investments authorized under applicable law;
	(3)  pay reasonable and necessary administrative
	expenses incurred in connection with the operation of the
	association and the processing of claims against the association;
	(4)  satisfy, in whole or in part, the obligations of
	the association incurred in connection with Subchapters B-2 [B-1],
	J, [and] M, and M-2, including reinsurance, public securities, and
	financial instruments; or
	(5)  make remittance under the laws of this state to be
	used by this state to:
	(A)  pay claims made on policies written by the
	association;
	(B)  purchase reinsurance covering losses under
	those policies; or
	(C)  prepare for or mitigate the effects of
	catastrophic natural events.
	SECTION 2.02.  (a) Section 2210.1052, Insurance Code, is
	amended to read as follows:
	Sec. 2210.1052.  EMERGENCY MEETING. If the ultimate loss
	estimate for an occurrence or series of occurrences made by the
	chief financial officer or chief actuary of the association
	indicates member insurers may be subject to an assessment under
	Subchapter B-1 or B-2, the board of directors shall call an
	emergency meeting to notify the member insurers about the
	assessment.
	(b)  Effective September 1, 2025, Section 2210.1052,
	Insurance Code, is amended to read as follows:
	Sec. 2210.1052.  EMERGENCY MEETING. If the ultimate loss
	estimate for an occurrence or series of occurrences made by the
	chief financial officer or chief actuary of the association
	indicates member insurers may be subject to an assessment under
	Subchapter B-2 [B-1], the board of directors shall call an
	emergency meeting to notify the member insurers about the
	assessment.
	SECTION 2.03.  Section 2210.363(a), Insurance Code, is
	amended to read as follows:
	(a)  The association may offer a person insured under this
	chapter an actuarially justified premium discount on a policy
	issued by the association, or an actuarially justified credit
	against a surcharge assessed against the person, other than a
	surcharge assessed under Subchapter M or M-2, if:
	(1)  the construction, alteration, remodeling,
	enlargement, or repair of, or an addition to, insurable property
	exceeds applicable building code standards set forth in the plan of
	operation; or
	(2)  the person elects to purchase a binding
	arbitration endorsement under Section 2210.554.
	SECTION 2.04.  (a) Sections 2210.452(a) and (d), Insurance
	Code, are amended 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
	trust fund may be used only for purposes directly related to funding
	the payment of insured losses, including:
	(1)  funding the obligations of the trust fund under
	Subchapters [Subchapter] B-1 and B-2; and
	(2)  purchasing reinsurance or using alternative risk
	financing mechanisms under Section 2210.453.
	(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 or B-2.
	(b)  Effective September 1, 2025, Sections 2210.452(a) and
	(d), Insurance Code, are amended 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
	trust fund may be used only for purposes directly related to funding
	the payment of insured losses, including:
	(1)  funding the obligations of the trust fund under
	Subchapter B-2 [B-1]; and
	(2)  purchasing reinsurance or using alternative risk
	financing mechanisms under Section 2210.453.
	(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-2 [B-1].
	SECTION 2.05.  (a) Sections 2210.453(b) and (c), Insurance
	Code, are amended to read as follows:
	(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 purchase of reinsurance or the use of alternative financing
	mechanisms, or both, to operate in addition to or in concert with
	the trust fund, public securities, financial instruments,
	investment arrangements, 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 Subchapters
	[Subchapter] B-1 and B-2.
	(b)  Effective September 1, 2025, Section 2210.453(c),
	Insurance Code, is amended to read as follows:
	(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-2 [B-1].
	ARTICLE 3. TRANSITION AND SAVINGS PROVISIONS
	SECTION 3.01.  Notwithstanding the amendment by this Act of
	Subchapter M, Chapter 2210, Insurance Code, the repeal by this Act
	of Subchapter B-1, Chapter 2210, Insurance Code, and other changes
	in law made by this Act effective September 1, 2025:
	(1)  the payment of excess losses and operating
	expenses of the Texas Windstorm Insurance Association incurred
	before January 1, 2024, is governed by the law as it existed on the
	effective date of this Act, and that law is continued in effect for
	that purpose;
	(2)  the issuance of public securities to pay excess
	losses and operating expenses of the Texas Windstorm Insurance
	Association incurred before January 1, 2024, the use of the
	proceeds of those securities, the repayment or refinancing of those
	securities, and any other rights, obligations, or limitations with
	respect to those securities and proceeds of those securities are
	governed by the law as it existed on the effective date of this Act,
	and that law is continued in effect for that purpose; and
	(3)  proceeds of any assessments made under Subchapter
	B-1, Chapter 2210, Insurance Code, may not be included in reserves
	available for a catastrophe year for purposes of Section 2210.082,
	Insurance Code, as added by this Act, unless approved by the
	commissioner of insurance.
	ARTICLE 4. EFFECTIVE DATE
	SECTION 4.01.  Except as otherwise provided by this Act,
	this Act takes effect September 1, 2023.
	* * * * *