HBA-TBM C.S.H.B. 1162 77(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 1162 By: Eiland Insurance 3/23/2001 Committee Report (Substituted) BACKGROUND AND PURPOSE The Texas Windstorm Insurance Association (association) is comprised of all property insurers authorized to transact property insurance in Texas. Under current law, the association is required to issue property insurance covering insurable property in the 14 Texas counties contiguous with the Gulf of Mexico. The association writes both commercial and residential risk plans in these counties. Rates for commercial policies are set each year by the commissioner of insurance (commissioner) at an open meeting and may not be contested. Residential policy rates, determined as part of the annual benchmark rate hearing process, are contestable. Contesting the residential policy rates is an expensive process in terms of time consumed as well as the cost. C.S.H.B. 1162 authorizes the commissioner to set rates for residential policies issued by the association in the same manner in which commercial rates are set. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. ANALYSIS C.S.H.B. 1162 amends the Insurance Code to modify provisions regarding rates and rating plans in the Texas Windstorm Insurance Association Act (Act). The bill provides that each rate established by the commissioner of insurance (commissioner) in accordance with the Act must be uniform throughout the catastrophe area in the seacoast territory (Sec. 8(h)(1), Art. 21.49). The bill deletes provisions related to the rates of noncommercial windstorm and hail insurance written by the Texas Windstorm Insurance Association (association) (Sec. 8(h)(3), Art. 21.49). Not later than August 15, rather than August 1, of each year, the association is required to file with the Texas Department of Insurance (TDI) for approval by the commissioner a proposed manual rate for all types and classes of risks written by the association. The bill removes provisions requiring the rate to be 90 percent of the rate for extended coverage for commercial risks (Sec. 8(h)(2), Art. 21.49). After conclusion of the open meeting to allow interested persons to comment on the filing, the commissioner is required to approve or disapprove or modify the filing in writing on or before November 15 instead of November 1 of the year in which the filing is made or the filing is deemed approved. The association is authorized to file an amended filing with the commissioner, not later than 30 days instead of 10 days after the date the association receives disapproval from the commissioner (Sec. 8(h)(6), Art. 21.49). The bill authorizes the commissioner to modify an amended filing of the manual rate before approving it (Sec. 8(h)(7), Art. 21.49). The bill authorizes the association to request and the commissioner to approve a different period of in time in which the association is required to provide additional supporting information related to a filing or an amended filing (Sec. 8(h)(8), Art. 21.49). The bill sets forth provisions for the development of rates and the determination of the catastrophe and non-catastrophe elements of rates promulgated under the Act (Secs. 8(h)(9, 11, 12, and 13), Art. 21.49). The bill requires TDI to value the loss and loss adjustment expense data to be used for a filing not earlier than March 31 of the year before the year in which the filing is to be made (Sec. 8(h)(15), Art. 21.49). Not later than June 1 of each year, TDI is required to provide the experience data to be used in establishing the rates in that year to the association and other interested persons (Sec. 8(h)(16), Art. 21.49). EFFECTIVE DATE September 1, 2001. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.H.B. 1162 differs from the original by modifying the bill to apply to the catastrophe area in the seacoast territory rather than the first tier coastal counties (Sec. 8(h)(1), Art. 21.49). The substitute extends the time limit from August 1 to August 15 of each year by which the Texas Windstorm Insurance Association (association) is required to file a proposed manual rate for all types and classes of risk written by the association (Sec. 8(h)(2), Art. 21.49). The substitute changes the dates the commissioner is required to approve or disapprove or modify the filing and the association is authorized to make an amended filing (Sec. 8(h)(6), Art. 21.49). The substitute provides that a rate filed by the association is prohibited from reflecting a rate change for an individual rating class that is 15 percent rather than 25 percent higher or lower than the rate for that individual class in effect on the date the filing is made. The substitute requires the commissioner of insurance (commissioner) to receive the approval of the governor before suspending this provision (Sec. 8(h)(9), Art. 21.49). The substitute provides that the noncatastrophe element of the commercial rates must be developed using 100 percent of both the loss experience and related premium income for the association for covered property using the most recent 10 years of experience available (Sec. 8(h)(13), Art. 21.49). The substitute extends the date from March 31 to June 1 by which the Texas Department of Insurance (TDI) is required to provide experience data to the association and other interested parties (Sec. 8(h)(16), Art. 21.49). The substitute removes the provision that requires rates promulgated under this article to be developed in accordance with the ususal and customary actuarial methodology used by the commissioner to promulgate property insurance rates. The substitute removes provisions relating to the contents and organization of the experience data provided by TDI.