| (a) Marketable public securities under this division
are public securities that the association in consultation with TPFA
determines:
(1) are consistent with state debt issuance policy
requirements; and
(2) achieve the goals of the association.
(b) In determining the amount of class 1 public securities
that can or cannot be issued, the association must consider:
(1) the association's current premium and net revenue;
(2) the effect of depopulation under Insurance Code
Chapter 2210, Subchapter O, on anticipated net premium and other revenue
and anticipated revenue from association surcharges;
(3) the estimated amount of debt service for the public
securities, including any contractual coverage amount;
(4) the association's obligations for outstanding public
securities, including contractual coverage requirements and public
security administrative expenses;
(5) the association's obligations for other financing
arrangements;
(6) any conditions precedent to issuing class 1 public
security obligations contained in any applicable public security financing
documents;
(7) TPFA administrative rules;
(8) applicable State of Texas debt issuance policies;
(9) administrative rules of the Office of the Attorney
General of Texas that require evidence of debt service and other obligation
coverage; and
(10) market conditions and requirements necessary to
sell marketable public securities, including issuing classes in installments.
(c) The association may rely on the advice and analysis
of TPFA, TPFA consultants, TPFA legal counsel, and third parties the
association has retained for this purpose in determining market conditions
and requirements under subsection (b) of this section. The association's
determination may include consideration of the following factors:
(1) interest rate spreads;
(2) municipal bond ratings of the public securities;
(3) prior issuances of catastrophe-related public securities
in Texas or any other state;
(4) similar financings in the market within the preceding
12 months;
(5) news or other publications relating to the association
or the issuance of catastrophe-related public securities;
(6) a nationally recognized investment banking firm's
confidence memorandum;
(7) legal and regulatory conditions; and
(8) any other market conditions and requirements that
the association deems necessary and appropriate.
(d) As part of each request for public securities,
the association must submit to the commissioner a cost-benefit analysis
of the various financing methods and funding structures that are available
to the association. The cost-benefit analysis must include:
(1) for public securities requested under §5.4124
of this division (relating to Issuance of Class 1 Public Securities
before a Catastrophic Event):
(A) estimates of the monetary costs of issuing public
securities, including issuance costs, debt service costs, and any
contractual coverage requirement;
(B) the benefits associated with issuing public securities,
including benefits to the association's claim-paying capabilities,
liquidity position, and other benefits associated with issuing public
securities before a catastrophic event; and
(C) estimates of the monetary costs, associated benefits,
and the availability of funding alternatives, such as providing financing
arrangements or additional financing arrangements, that provide similar
funding and at a similar layer;
(2) for public securities requested under this division
following a catastrophic event:
(A) estimates of the monetary costs of issuing public
securities, including issuance costs, debt service costs, and any
contractual coverage requirement;
(B) the benefits associated with issuing public securities,
including benefits to the association's claim-paying capabilities
and other benefits associated with issuing public securities; and
(C) the availability of alternative funding arrangements,
if any, including the monetary costs and benefits associated with
any available alternative funding arrangements.
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