New Rules Implement Legislative Changes to TWIA Funding

AUSTIN, Texas, May 23 -- The Texas Department of Insurance issued the following news release:

The Texas Department of Insurance (TDI) today issued final rules to update existing loss funding and premium surcharge rules for the Texas Windstorm Insurance Association (TWIA), as required by HB 3, 82nd Legislature, 1st Called Session (2011). The rules provide a process for the Texas Public Finance Authority to issue bonds on TWIA's behalf in the case of a catastrophic event that depletes TWIA's available funds.

TWIA was created by the Texas Legislature in 1971 to provide windstorm and hail coverage to coastal residents who are unable to obtain insurance from the voluntary insurance market.

"The purpose of these rules is to implement the legislation that created an orderly process for issuing bonds and paying back those bonds," said Commissioner of Insurance Julia Rathgeber. "This process is critical after a storm or event. Lenders need the certainty that these rules will provide, and coastal residents need the certainty that in the event of a storm, there will be adequate funds to pay insurance claims."

Since 2009, the Insurance Code has required TWIA to issue bonds to provide additional money to pay claims if TWIA does not have sufficient funds to pay claims from its premium, other revenue, and catastrophe reserve trust fund. TDI previously adopted loss funding and premium surcharge rules to implement HB 4409, 81st Legislature (2009), which established TWIA's current funding structure. HB 3 (2011) amended TWIA's loss funding by authorizing the issuance of pre-event class 1 bonds, establishing an alternative to issue post-event class 2 and 3 bonds if the fully authorized amount of class 1 bonds cannot be issued, and specifying the lines of insurance that are subject to a premium surcharge used to pay back class 2 bonds. Surcharges would only apply in the event that class 2 bonds are needed to pay claims after a storm.

TDI worked diligently to ensure a deliberate and transparent discussion throughout the rule-making process, with the goal of establishing a formal process for bond issuance in time for the 2014 hurricane season beginning June 1. On October 14, 2013, TDI published informal draft rules for public comment on its website. A formal rule proposal was published in the Texas Register on February 14, 2014, with a 25-day public comment period. Public comment also was heard at three public hearings on the rule proposal, one in Beaumont, one in Austin, and one in Corpus Christi. TDI received approximately 340 written and oral comments on the rule proposals from stakeholders, including hundreds of individuals along the coast who took the time to express their thoughts on TWIA and premium surcharges.

The final rules have been submitted to the Texas Register for publication on Friday, June 6, 2014, and will be effective Thursday, June 12, 2014.

For more information contact: [email protected]

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