| (a) Purpose. Under Insurance Code §2210.505, the
Texas Windstorm Insurance Association may issue a policy of windstorm
and hail insurance that includes coverage for an amount in excess
of the maximum limit of liability approved by the commissioner.
(b) Definitions. The following words and terms when
used in this section have the following meanings unless the context
clearly indicates otherwise.
(1) Available reinsurance capacity--Amount of reinsurance
purchased by the association pursuant to the excess per risk reinsurance
contract to provide reinsured excess coverage to association policyholders
as provided in Insurance Code §2210.505.
(2) Excess per risk reinsurance contract--An agreement
entered into by the association with an approved reinsurer to provide
coverage to association policyholders for an amount in excess of the
liability limits approved by the commissioner.
(3) Reinsured excess coverage--Coverage provided under
a windstorm and hail insurance policy issued by the association through
a reinsurance agreement with an approved reinsurer for amounts of
insurance that are in excess of the maximum limits of liability available
to the individual risk from the association.
(4) Reinsured excess coverage program--The program
operated by the association to provide reinsured excess coverage,
the excess per risk reinsurance contract or contracts entered into
between the association and the commissioner-approved reinsurer or
reinsurers, this section, and any orders issued, including the collection
of premium, issuance of coverage under the windstorm and hail insurance
policy, and the processing and payment of claims for the reinsured
excess coverage.
(c) Administration.
(1) The association must administer the reinsured excess
coverage program on behalf of each policyholder of a windstorm and
hail insurance policy to which reinsurance is provided by an approved
reinsurer.
(2) The association must distribute the available reinsurance
capacity for the reinsured excess coverage in a fair and reasonable
manner to risks qualifying under the association's reinsured excess
coverage program.
(3) The association must annually review the reinsured
excess coverage program, including the rates, reinsurers, excess per
risk reinsurance contracts, use of available reinsurance capacity,
the association's costs to administer the reinsured excess coverage
program, and the rules in this section, and must provide an annual
summary of the review to the commissioner.
(d) Approval of reinsurer. Before the association may
provide reinsurance coverage on an individual risk that is in excess
of the maximum limits of liability approved by the commissioner, the
association must first obtain from a reinsurer approved by the commissioner
reinsurance for the full amount of policy exposure above the limits
approved by the commissioner for any given type of risk. The approval
of the reinsurer must be in accordance with this subsection.
(1) The association must submit a petition to the commissioner
requesting approval of the reinsurer before any excess per risk reinsurance
contract or renewal of such contract becomes effective. The petition
must include the name of the proposed reinsurer or reinsurers; the
reinsurance proposal; the draft excess per risk reinsurance contract;
information on the financial health of the proposed reinsurer or reinsurers
and any other information related to the reasons for the association's
selection of reinsurer or reinsurers; estimated costs for the reinsurance;
the proposed cost to the association to administer the reinsured excess
coverage program; estimated total premium for the reinsurance; the
method of making the reinsurance capacity available to policyholders;
and any other information the association or the commissioner deems
necessary to enable the commissioner to determine whether to approve
or disapprove the proposed reinsurer or reinsurers.
(2) The commissioner must issue an order approving
or disapproving the proposed reinsurer. The order must be issued no
later than December 31 of each year preceding the calendar year in
which the reinsured excess coverage program is operated except for
the first year the program is operated when the order must be issued
following the adoption of this section.
(3) An excess per risk reinsurance contract may not
become effective until the commissioner has issued an order approving
the reinsurer. The excess per risk reinsurance contract does not require
approval by the commissioner.
(4) The association must submit written notice of any
amendments to any existing excess per risk reinsurance contract to
the commissioner at least 30 days prior to the effective date of the
proposed amendments. The notice must include an explanation of the
reason for the amendments and a copy of the draft amendments. The
reinsurer under the amended contract must be deemed approved by the
commissioner unless within 30 days following the submission of the
written notice the commissioner enters an order disapproving the reinsurer.
Amendments to the contract do not require approval by the commissioner.
(e) Coverage. The association may issue a policy of
windstorm and hail insurance that includes coverage that is in excess
of a liability limit approved by the commissioner. Any such policy
must be issued in accordance with this subsection.
(1) Excess liability limits. The amount of reinsurance
excess coverage available to an individual risk must be determined
in accordance with the reinsured excess coverage program.
(2) Policy provisions.
(A) The total limit of liability must be the limit
of liability insured by the association and the amount of reinsured
excess coverage provided on the individual risk under the reinsured
excess coverage program.
(B) All terms and conditions of the windstorm and hail
insurance policy issued by the association must apply to the reinsured
excess coverage provided under the windstorm and hail insurance policy.
(C) The amount of reinsured excess coverage must be
shown separately on the declarations page of the policy.
(3) Types of risks.
(A) The association may provide reinsured excess coverage
for dwelling structures only, commercial structures only, or for both
dwelling structures and commercial structures.
(B) Reinsured excess coverage may be provided on either
buildings or contents, or on building and contents. If reinsured excess
coverage is provided on building and contents, building structures
must be insured for 100 percent replacement cost, up to the total
maximum limit of liability available for the risk and the available
reinsured excess coverage amount provided under the reinsured excess
coverage program before reinsured excess coverage may be applied to
contents.
(f) Premium.
(1) Premium computation. The total premium charged
by the association for the reinsured excess coverage provided on a
windstorm and hail insurance policy issued by the association must
be the total of:
(A) the amount of the excess per risk reinsurance premium
charged to the association by the reinsurer for the reinsured excess
coverage provided on any given risk; and
(B) the payment to the association that is approved
by the commissioner.
(2) Display of premium. The total premium charged by
the association for the reinsured excess coverage provided in a windstorm
and hail insurance policy issued by the association must be shown
separately on the declarations page of the policy.
(g) Payment to the association. The premium charged
by the association for the excess coverage must be equal to the amount
of the reinsurance premium charged to the association by the reinsurer
plus any payment to the association that is approved by the commissioner.
(1) The payment to the association that may be proposed
by the association for approval by the commissioner may include the
amount of the direct and indirect costs identified by the association
to administer the reinsured excess coverage program and may include
costs for claims, underwriting, accounting, technical and administrative
support, computer equipment, agent commissions, taxes, and any other
administrative costs approved by the commissioner.
(2) The commissioner will issue an order approving
or disapproving the proposed payment to the association. The commissioner
may take action in the order issued under subsection (d)(2) of this
section.
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