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TITLE 28INSURANCE
PART 1TEXAS DEPARTMENT OF INSURANCE
CHAPTER 5PROPERTY AND CASUALTY INSURANCE
SUBCHAPTER ETEXAS WINDSTORM INSURANCE ASSOCIATION
DIVISION 1PLAN OF OPERATION
RULE §5.4001Plan of Operation
Historical Texas Register

(a) Definitions.

  (1) Words defined in Act. Unless the context clearly dictates the contrary, words defined in the Texas Catastrophe Property Insurance Pool Act (the Insurance Code, Article 21.49, as amended) and not specifically defined in this section shall have the same definition when used in this section as they have in such Act. The terms "this section" and "plan of operation" are used interchangeably herein.

  (2) Definitions in the section. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

    (A) Act--The Texas Catastrophe Property Insurance Pool Act, Senate Bill 31, Acts of the 62nd Legislature, 1971, as amended; codified as the Insurance Code, Article 21.49, as amended.

    (B) Application--An application for catastrophe insurance.

    (C) Association--The Texas Catastrophe Property Insurance Association.

    (D) Board--The State Board of Insurance.

    (E) Board of directors--The board of directors of the Texas Catastrophe Property Insurance Association.

    (F) Catastrophe insurance--For the purpose of this plan of operation, means Texas windstorm and hail insurance.

    (G) Catastrophe loss--A loss to property insured by a policy of Texas windstorm and hail insurance. "Catastrophe losses" means more than one catastrophe loss.

    (H) Chair of the board--The chair of the board of directors of the Texas Catastrophe Property Insurance Association.

    (I) Commissioner--Commissioner of Insurance of the State of Texas.

    (J) Corporeal property--Tangible personal property.

    (K) Department--Texas Department of Insurance.

    (L) Indirect losses--Personal Lines.

      (i) Except as provided in clause (iii) of this subparagraph, a policy of windstorm and hail insurance issued by the association for a dwelling as defined by the Department in the association's rates and rules manual, must include coverage for:

        (I) wind-driven rain damage, regardless of whether an opening is made by the wind;

        (II) loss of use, meaning additional living expenses; and

        (III) consequential losses.

      (ii) Except as provided in clause (iii) of this subparagraph, a policy of windstorm and hail insurance issued by the association for tenant contents of a dwelling or other residential building must include coverage for:

        (I) loss of use, meaning additional living expenses; and

        (II) consequential losses.

      (iii) The association is not required to:

        (I) offer coverage for indirect losses as provided in clauses (i) and (ii) of this subparagraph unless the coverage was excluded from a companion policy issued in the voluntary market; or

        (II) provide loss of rents or loss of rental value coverage as part of a loss of use coverage or additional living expense coverage to a secondary or non-primary residence.

    (M) Member--An insurer required to be a member of the association by the Act, §4, or where the context indicates, any duly authorized agent or representative of such insurer. "Members" shall mean more than one member.

    (N) Net direct premiums--

      (i) For association policies with inception dates on and after January 1, 1993, "net direct premiums" shall mean all statewide direct written premiums (excluding direct written premiums in catastrophe area as designated by the Commissioner) and shall be the sum of the following:

        (I) 90% of the direct written premiums of the extended coverage line of business and 90% of the direct written premiums on the other allied lines of business as reported in accordance with the property statistical plan promulgated by the Commissioner for property insurance, which the association shall obtain from the Department, and as may be furnished to the association by the Department after review of the insurer's annual statement, other reports, and other statistics the Department shall deem necessary;

        (II) 90% of the extended coverage and other allied lines portion of the direct written premiums on the multiple peril line of business as reported in accordance with the property statistical plan promulgated by the Commissioner for property insurance, which the association shall obtain from the Department, and as may be furnished to the association by the Department after review of the insurer's annual statement, other reports, and other statistics the Department shall deem necessary; and

        (III) 50% of the direct written premium or such other percentage as may be determined by the board of directors of the association, without further action by the Commissioner, upon analysis of appropriate statistics for wind, hail, water damage, and all other perils, on the homeowner's multiple peril line of business as reported in accordance with the property statistical plan promulgated by the Commissioner for property insurance, which the association shall obtain from the Department, and as may be furnished to the association by the Department after review of the insurer's annual statement, other reports, and other statistics the Department shall deem necessary and farm and ranch owners' multiple peril line of business as reported in accordance with the property statistical plan promulgated by the Commissioner for property insurance, which the association shall obtain from the Department, and as may be furnished to the association by the Department after review of the insurer's annual statement, other reports, and other statistics the Department shall deem necessary, provided, no adjustment of five percentage points or less shall be made, and further provided, that no adjustment shall be made in less than three years from the last prior adjustment;

        (IV) the extended coverage and other allied lines portion of the following policies, which shall be calculated as follows:

          (-a-) 40% of the total premium for any commercial policy issued under a composite rate; or

          (-b-) 40% of the total policy premium or the combined actual extended coverage and other allied lines premium charged whichever is greater, for any property insurance policy written by an insurance company that is not authorized to transact property insurance in Texas, and which is affiliated under common management or control of an insurance company licensed to transact property insurance in Texas.

      (ii) For association policies with inception dates on and after January 1, 1988, through December 31, 1992, "net direct premiums" shall mean all statewide direct written premiums (excluding direct written premiums in the catastrophe area as designated by the State Board of Insurance) restored to manual level and further adjusted to the manual rate level applicable to the catastrophe area as designated by the State Board of Insurance and shall be the sum of the following:

        (I) 90% of the direct written premiums of the extended coverage line of business and 90% of the direct written premiums on the other allied lines of business as reported in accordance with the property statistical plan promulgated by the Commissioner for property insurance which the association shall obtain from the Department and as may be furnished to the association by the Department after review of the insurer's annual statement, other reports, and other statistics the Department shall deem necessary;

        (II) 90% of the extended coverage and other allied lines portion of the direct written premiums on the multiple peril line of business as reported in accordance with the property statistical plan promulgated by the Commissioner for property insurance, which the association shall obtain from the Department, and as may be furnished to the association by the Department after review of the insurer's annual statement, other reports, and other statistics the Department shall deem necessary;

        (III) 50% of the direct written premium or such other percentages as may be determined by the board of directors of the association, without further action by the Commissioner, upon analysis of appropriate statistics for wind, hail, water damage, and all other perils, on the homeowner's multiple peril line of business as reported in accordance with the property statistical plan promulgated by the Commissioner for property insurance, which the association shall obtain from the Department, and as may be furnished to the association by the Department after review of the insurer's annual statement, other reports, and other statistics the Department shall deem necessary and farm and ranch owners' multiple peril line of business as reported in accordance with the property statistical plan promulgated by the Commissioner for property insurance, which the association shall obtain from the Department, and as may be furnished to the association by the Department after review of the insurer's annual statement, other reports, and other statistics the Department shall deem necessary, provided, no adjustment of five percentage points or less shall be made, and further provided, that no adjustment shall be made in less than three years from the last prior adjustment.

        (IV) the extended coverage and other allied lines portion of the following policies, which shall not be restored to manual rate levels, and which shall be calculated as follows:

          (-a-) 40% of the total policy premium or the combined actual extended coverage and other allied lines premium charged, whichever is the greater, for any commercial policy issued pursuant to the Insurance Code, Article 5.13-2 or Article 5.26(c), or for policies issued pursuant to the Insurance Code, Article 5.31; or

          (-b-) 40% of the total policy premium or the combined actual extended coverage and other allied lines premium charged, whichever is greater, for any property insurance policy written by an insurance company that is not authorized to transact property insurance in Texas, and which is affiliated under common management or control of an insurance company licensed to transact property insurance in Texas.

      (iii) For association policies with inception dates on and after January 1, 1983 through December 31, 1987, inclusive, net direct premiums means the sum of the following premiums:

        (I) 90% of the direct written premiums on the extended coverage line of business as reflected on line two, column (1), of the insurer's last Texas annual statement;

        (II) 90% of the extended coverage portion of the direct written premiums on the multiple peril line of business as reported on line eight, column (1), of the insurer's last Texas annual statement; and

        (III) 40% of the direct written premiums on the homeowners' multiple peril line of business as reported on line four, column (1), of the insurer's last Texas annual statement.

      (iv) For association policies with inception dates on and after January 1, 1978, through December 31, 1982, inclusive, net direct premiums means the sum of the following premiums:

        (I) 90% of the direct written premiums on the extended coverage line of business as reflected on line two, column (1), of the insurer's last Texas annual statement;

        (II) 90% of the extended coverage portion of the direct written premiums on the multiple peril line of business as reported on line eight, column (1), of the insurer's last Texas annual statement; and

        (III) 40% of the direct written premiums on the homeowners' multiple peril line of business as reported on line four, column (1), of the insurer's last Texas annual statement.

    (O) Secretary-treasurer--The secretary-treasurer of the Texas Catastrophe Property Insurance Association.

    (P) Texas windstorm and hail insurance--Deductible insurance against direct loss and indirect losses resulting from a direct loss to insurable property as a result of windstorm or hail as such terms shall be defined and limited in policies and forms approved by the Commissioner. The deductible amount which shall be applied to all risks written by the association shall be determined by the board of directors and approved by the Commissioner.

    (Q) Vice chair or vice chair of the board--The vice chair of the board of directors of the Texas Catastrophe Property Insurance Association.

(b) Operational Procedures of the Texas Catastrophe Property Insurance Association.

  (1) Members.

    (A) Membership. The membership of the Texas Catastrophe Property Insurance Association shall consist of all insurers required to be members of the association by the Act, §4; provided, however, that all insurers which were not members of the association prior to the effective date of Senate Bill 659, 64th Legislature, 1973, and which became members of the association by virtue of Senate Bill 659 shall participate in the association commencing on January 1, 1974, in the same manner as for all other members of the association, provided, further, that for the purposes of determining participation in the association two or more members having a common ownership or operating in this state under common management or control shall be treated as if they constituted a single member.

    (B) Notice of meetings. Written or printed notice stating the place, day, and hours of the meeting, and in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than 10 nor more than 50 days before the date of the meeting, either personally or by mail, by or at the direction of the chair of the board of directors, the secretary-treasurer, or other person calling the meeting, to each member entitled to vote as such meeting.

Cont'd...

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