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Texas Insurance Code - Not Codified - Article 21.49-17. Risk Management Pools
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Art. 21.49-17. RISK MANAGEMENT POOLS.
Article repealed effective April 1, 2007
Definitions
Sec. 1. In this article:
(1) "School district" means a public school district
created under the laws of this state.
(2) "Junior college district" means a junior college
district organized under the laws of this state.
(3) "Entity" means a school district or junior college
district.
(4) "Pool" means a risk management pool created under this
article.
(5) "Fund" means a risk management fund.
(6) "Board" means the board of trustees of a pool.
(7) "Plan" means a pool's plan of operation.
Creation of pools
Sec. 2. (a) Separate risk management pools may be created for
school districts and for junior college districts as provided by
this article.
(b) On the adoption of a resolution by not fewer than five
boards of trustees of school districts to create the school
district risk management pool or not fewer than five boards of
trustees of junior college districts to create the junior college
risk management pool, the risk management pool for the type of
governmental entity is created.
(c) The risk management pool for school districts is created
to insure each school district that purchases coverage in the pool
against liability for its acts and omissions under the law. The
risk management pool for junior college districts is created to
insure each junior college district that purchases coverage in the
pool against liability for its acts and omissions under the law.
(d) School districts may not participate in the junior
college district risk management pool and junior college districts
may not participate in the school district risk management pool.
(e) There may not be more than one school district risk
management pool and not more than one junior college district risk
management pool created under this article.
Membership in a pool
Sec. 3. A school district or a junior college district in this
state that meets the criteria established by its respective pool in
that pool's plan may purchase from that pool coverage insuring the
district against liability for its acts or omissions under the law
and may use funds of the district to pay any fees, contributions, or
premiums required to be a part of the pool and to obtain that
coverage.
Meeting; guidelines and temporary board
Sec. 4. (a) On authorization to create a pool as provided by
Section 2 of this article, each board adopting a resolution to
create the pool shall select one representative to meet with
representatives of the other school districts or junior college
districts adopting the resolution.
(b) At the meeting, the representatives shall adopt
guidelines for developing an organizational plan for the pool and
shall select nine persons to serve as a temporary board of trustees.
Plan of operation
Sec. 5. (a) Within 30 days after selection, the members of the
temporary board shall meet and begin to prepare a detailed plan of
operation for the pool.
(b) The plan may include any matters relating to the
organization and operation of the pool and its finances and shall
include:
(1) the organizational structure of the pool, including the
number, method of selection, and method of procedure and operation
of the regular board for the pool and a summary of the method for
managing and operating the pool;
(2) a description of the fees, contributions, or financial
arrangements necessary to cover the initial expenses of the pool
and estimates supported by statistical data of the amounts of those
fees, contributions, or other financial arrangements;
(3) underwriting guidelines and procedures for the
evaluation of risks;
(4) procedures for purchase of reinsurance;
(5) methods, procedures, and guidelines for establishing
rates for premiums for and limits of coverage in the pool;
(6) procedures for the processing and payment of claims;
(7) methods and procedures for defraying losses and
expenses of the pool;
(8) methods, procedures, and guidelines for the management
and investment of the fund;
(9) minimum limits of capital and surplus to be maintained
by the pool; and
(10) minimum standards for reserve requirements for the
pool.
(c) The temporary board shall complete the plan within 90
days after the date of the appointment of the temporary board.
Board of trustees
Sec. 6. (a) The pool is governed by a board of trustees as
provided in the plan.
(b) Not later than the 15th day after the plan is completed
by the temporary board, the initial regular board must be selected
and take office as provided by the plan.
(c) A person serving on the board who is an officer or
employee of an entity covered by the pool performs duties on the
board as additional duties required of his original office or
employment.
(d) The general administration and operation of the pool and
its fund are vested in the board.
(e) A member or employee of the board is not liable with
respect to any claim or judgment for which coverage is provided by
the pool or for a claim or judgment against any entity covered by
the pool against whom a claim is made.
(f) Each member of the board and each employee of the board
who has any authority over money in the fund or money collected or
invested by the pool shall execute a bond in an amount determined by
the board, payable to the pool, conditioned on the faithful
performance of his duties. The cost of the bond shall be paid by the
pool.
Risk management fund
Sec. 7. (a) Immediately after taking office, the initial
regular board shall create a risk management fund. The fund must
include:
(1) fees, contributions, and premiums collected by the
pool;
(2) investments of money in the fund;
(3) interest earned on investments made by the pool; and
(4) any other income received by the pool from any sources.
(b) The board shall manage and invest the money in the fund
in the manner provided by the plan.
(c) The money in the fund shall be used to pay liability
claims and judgments against entities that are participants in the
pool up to the limits of the coverage provided by the pool. Also,
money in the fund may be used to pay the administrative and
management costs of the pool and the fund up to the limits provided
in the plan.
Rates and coverage
Sec. 8. The board shall determine the rates for premiums that
will be charged and the limits of coverage provided to assure that
the pool and the fund are actuarially sound.
Reinsurance
Sec. 9. The board may purchase reinsurance for any risks
covered by the pool.
General authority
Sec. 10. The board may exercise any powers and may enter into
any contracts necessary to carry out this article and the plan.
Personnel
Sec. 11. (a) The board may employ a fund manager and other
persons necessary to carry out this article and the plan.
(b) The board may employ or contract with persons or
insurance carriers for underwriting, accounting, claims, and other
services.
Initial coverage
Sec. 12. (a) An entity that applies for initial coverage from
a pool is entitled to coverage for an initial period of not less
than one year regardless of loss history.
(b) The board may approve a longer period of initial
coverage.
(c) To obtain coverage for the initial period, the board may
require that the entity participate in a risk management appraisal
and comply with the recommendations obtained from the appraisal.
(d) If risk management techniques suggested by the
appraisal do not sufficiently reduce losses during the initial
coverage period to meet the pool's underwriting standards, the
board may deny an entity further coverage by the pool.
(e) A pool may assess a surcharge to any risk covered during
the initial period if the risk does not meet the basic underwriting
guidelines for the pool.
Commissions
Sec. 13. A pool may pay commissions from the fund on approval
of the board.
Rules
Sec. 14. The board may adopt rules to carry out this article
and the plan.
Application of insurance laws
Sec. 15. (a) Except as provided by Subsection (b) of this
section, a pool provided by this article is not considered
insurance under this code and other laws of this state and the State
Board of Insurance has no jurisdiction over the pool.
(b) The pool shall collect the necessary data, information,
and statements and shall file with the State Board of Insurance the
reports and statements required by Articles 1.24A and 1.24B and is
subject to 21.21 of this code.
Added by Acts 1987, 70th Leg., 1st C.S., ch. 1, Sec. 5.07, eff.
Sept. 2, 1987.
Article: 21.49-8 21.49-11 21.49-13 21.49-14 21.49-15 21.49-15A 21.49-16 21.49-17 21.49-18 21.49-20 21.49A. FAIR PLAN (FAIR ACCESS TO INSURANCE
REQUIREMENTS) ACT.
Article repealed effective April 1, 2007
Authority; Purpose
Sec. 1. (a) If the commissioner determines, after a public
hearing, that in all or any part of the state residential property
insurance is not reasonably available in the voluntary market to a
substantial number of insurable risks or that at least 25 percent of
the applicants to the residential property market assistance
program who are qualified under the plan of operation have not been
placed with an insurer in the previous six-month period, the
commissioner may establish a FAIR (Fair Access to Insurance
Requirements) Plan to deliver residential property insurance to
citizens of this state in underserved areas, which shall be
determined and designated by the commissioner by rule.
(a-1) Expired.
(b) Except as provided by this subsection, each insurer, as
defined herein, as a condition of its authority to transact
residential property insurance in this state, shall participate in
the FAIR Plan Association in accordance with this Act. The Texas
Windstorm Insurance Association established by Article 21.49 of
this code may not participate in the FAIR Plan Association for any
purpose.
(c) The FAIR Plan may not provide windstorm and hail
insurance coverage for a risk eligible for that coverage under
Article 21.49 of this code.
Definitions
Sec. 2. (1) "FAIR Plan Association" or "association" means a
nonprofit association established pursuant to this Act to develop
and administer a program to provide residential property insurance
in designated underserved areas in this state.
(2) "Insurer" means any licensed insurer writing property
and casualty insurance in this state, including:
(A) a Lloyd's plan company; and
(B) a reciprocal or interinsurance exchange.
(3) "Residential property insurance" means the coverage
against loss to real or tangible personal property at a fixed
location provided in a homeowners policy, residential fire and
allied lines policy, or farm and ranch owners policy.
(4) "Inspection bureau" means the organization or
organizations designated by the FAIR Plan Association with the
approval of the commissioner to make inspections to determine the
condition of the properties for which residential property
insurance is sought and to perform such other duties as may be
authorized by the FAIR Plan Association or the commissioner. The
manner and scope of the inspection and evaluation report for
residential property shall be prescribed by the association
pursuant to the plan of operation.
(5) "Net direct premiums" means gross direct written
premiums less return premiums upon canceled contracts
(irrespective of reinsurance assumed or ceded) written on
residential property pursuant to this Act.
(6) "Underserved area(s)" means area(s) designated as
underserved by the commissioner by rule. In determining which
areas will be designated as underserved, the commissioner shall
consider the factors specified in Section 1, Article 5.35-3, of
this code.
Governing Committee; Plan of Operation
Sec. 3. (a) The FAIR Plan shall be administered by the
governing committee of the association pursuant to a plan of
operation. Subject to the approval of the commissioner, the
governing committee shall develop the plan of operation and propose
amendments thereto. The plan of operation and any amendments
thereto shall be adopted by the commissioner by rule. The governing
committee may on its own initiative or at the request of the
commissioner amend the plan of operation.
(b) The governing committee shall be composed of 11 members
appointed by the commissioner as follows:
(1) five members who represent the interests of insurers;
(2) four public members who reside in this state; and
(3) two members who are licensed general property and
casualty agents.
(c) The commissioner or the commissioner's designated
representative from within the Texas Department of Insurance shall
serve as an ex officio member.
(d) To be eligible to serve on the governing committee as a
representative of insurers, a person must be a full-time employee
of an authorized insurer that is a member of the association. A
member of the governing committee may be removed by the
commissioner without cause and replaced in accordance with
Subsection (b) of this section.
(e) The plan of operation shall provide:
(1) for establishment of a FAIR Plan Association for the
issuing of residential property insurance pursuant to this Act and
the distribution of the losses and the expenses in the writing of
such insurance in this state;
(2) that all insurers licensed to write property insurance
and writing residential property insurance shall participate in the
assessments of the association, in the proportion that the net
direct premiums, of each participating insurer, written in this
state during the preceding calendar year, bear to the aggregate net
direct premium written in this state by all participating insurers;
such information shall be determined in accordance with the
residential property statistical plan adopted by the commissioner;
(3) that a participating insurer is entitled to receive
credit for similar insurance voluntarily written in a designated
underserved area and its participation in the assessments of the
association shall be reduced in accordance with the provisions of
the plan of operation;
(4) for the immediate binding of eligible risks; for the
use of premium installment payment plans, adequate marketing, and
service facilities; and for the establishment of reasonable
service standards;
(5) procedures for efficient, economical, fair, and
nondiscriminatory administration of the FAIR Plan Association;
(6) procedures for determining the net level of
participation required for each insurer in the FAIR Plan
Association;
(7) for the use of deductibles and other underwriting
devices and for assessment of all members in amounts sufficient to
operate the association; and establish maximum limits of liability
to be placed through the program; and commissions to be paid to the
licensed agents submitting applications;
(8) that the association issue policies in its own name;
(9) reasonable underwriting standards for determining
insurability of the risk;
(10) procedures for the assumption and ceding of
reinsurance by the association; and
(11) any other procedures or operational matters deemed
necessary by the governing committee or the commissioner.
(f) Notwithstanding Chapter 551, Government Code, or any
other law, members of the governing committee may meet by telephone
conference call, video conference, or other similar
telecommunication method. The governing committee may use
telephone conference call, video conference, or other similar
telecommunication method for purposes of establishing a quorum or
voting or for any other meeting purpose in accordance with this
subsection and Subsection (g) of this section. This subsection
applies without regard to the subject matter discussed or
considered by the members of the governing committee at the
meeting.
(g) A meeting held by telephone conference call, video
conference, or other similar telecommunication method:
(1) is subject to the notice requirements applicable to
other meetings of the governing committee;
(2) may not be held unless notice of the meeting specifies
the location of the meeting at which at least one member of the
governing committee is physically present;
(3) must be audible to the public at the location specified
in the notice under Subdivision (2) of this subsection; and
(4) must provide two-way audio communication between all
members of the governing committee attending the meeting during the
entire meeting, and if the two-way audio communication link with
members attending the meeting is disrupted so that a quorum of the
governing committee is no longer participating in the meeting, the
meeting may not continue until the two-way audio communication link
is reestablished.
FAIR Plan Association
Sec. 4. Pursuant to procedures and requirements set forth in
the plan of operation, the FAIR Plan Association (association)
shall develop and administer a program for participation by all
insurers licensed to write property insurance in this state and
writing residential property insurance in this state. The
association shall make residential property insurance available to
applicants in underserved areas whose property is insurable in
accordance with reasonable underwriting standards but who, after
diligent efforts, are unable to procure such insurance through the
voluntary market, as evidenced by two declinations from insurers
licensed to write and actually writing residential property
insurance in the state.
Powers of the Association; Centralized Operations Authorized
Sec. 5. (a) The association is authorized, for FAIR Plan
purposes only, to issue policies of insurance and endorsements
thereto in its own name or a trade name duly adopted for that
purpose, and to act on behalf of all participating insurers in
connection with said policies and otherwise in any manner necessary
to accomplish the purposes of this Act, including but not limited to
issuance of policies, collection of premiums, issuance of
cancellations, and payment of commissions, losses, judgments, and
expenses.
(b) The participating insurers shall be liable to the
association as provided in this Act and the plan of operation for
the expenses and liabilities so incurred by the association, and
the association shall make assessments against the participating
insurers as required to meet such expenses and liabilities. In
connection with any policy issued by the association:
(1) service of any notice, proof of loss, legal process, or
other communication with respect to the policy shall be made upon
the association; and
(2) any action by the insured constituting a claim under the
policy shall be brought only against the association, and the
association shall be the proper party for all purposes in any action
brought under or in connection with any such policy. The foregoing
requirements shall be set forth in any policy issued by the
association and the form and content of any such policy shall be
subject to the approval of the commissioner.
(c) The association is authorized to assume and cede
reinsurance in conformity with the plan of operation.
(d) Each insurer must participate in the assessments of the
association in the proportion that its net direct premiums written
bear to the aggregate net direct premiums written by all insurers.
Coverage for Windstorm and Hail Insurance; Coverage for Certain
Property Located Over Water
Sec. 5A. (a) A policy issued by the association may include
coverage against loss or damage by windstorm or hail for:
(1) a building or other structure that is built wholly or
partially over water; and
(2) the corporeal movable property contained in a building
or structure described by Subdivision (1) of this subsection.
(b) The association may impose appropriate limits of
coverage and deductibles for coverage described by Subsection (a)
of this section.
(c) The governing committee of the association shall submit
any proposed changes to the plan of operation necessary to
implement Subsections (a) and (b) of this section to the
commissioner for the approval of the commissioner in the manner
provided by Section 3(a) of this article.
(d) The commissioner shall adopt rules as necessary to
implement this section, including any rules necessary to implement
changes in the plan of operation proposed under Subsections (a) and
(b) of this section.
Property Inspection; FAIR Plan Procedure
Sec. 6. (a) Any person having an insurable interest in real or
tangible personal property at a fixed location in an underserved
area who, after diligent effort has been unable to obtain
residential property insurance, as evidenced by two current
declinations from insurers licensed to write property insurance and
actually writing residential property insurance in the state, is
entitled upon application to the association to an inspection and
evaluation of the property by representatives of the inspection
bureau.
(b) Applications may be made on behalf of the applicant by a
licensed general lines property and casualty agent and shall be
submitted on forms prescribed by the association.
(c) Promptly after the request for inspection is received,
an inspection must be made and an inspection report filed with the
association and made available to the applicant upon request.
(d) If the inspection bureau finds that the residential
property meets the reasonable underwriting standards established
in the plan of operation, the applicant shall be so informed in
writing and a policy or binder shall be issued by the association.
If the residential property does not meet the criteria, the
applicant shall be informed, in writing, of the reasons for the
failure of the residential property to meet the criteria.
(e) If, at any time, the applicant makes improvements in the
residential property or its condition which the applicant believes
are sufficient to make the residential property meet the criteria,
a representative of the inspection bureau shall reinspect the
residential property upon request. In any case, the applicant for
residential property insurance shall be eligible for one
reinspection any time within 60 days after the initial FAIR Plan
inspection. If upon reinspection the residential property meets
the reasonable underwriting standards established in the plan of
operation, the applicant shall be so informed in writing and a
policy or binder shall be issued by the association.
Approval of Rates
Sec. 7. The association shall file with the commissioner for
approval the proposed rates and supplemental rate information to be
used in connection with the issuance of policies or endorsements.
Rates shall be set in an amount sufficient to carry all claims to
maturity and to meet the expenses incurred in the writing and
servicing of the business. Within 60 days of the filing of the
proposed rates, the commissioner shall enter an order either
approving or disapproving, in whole or in part, the proposed rates.
The commissioner may, upon notice to the association, extend the
period for entering an order under this section an additional 30
days. No such policies or endorsements shall be issued until such
time as the commissioner approves the rates to be applied to the
policy or endorsement. An order disapproving a rate shall state the
grounds for the disapproval and the findings in support thereof.
Appeals; Judicial Review
Sec. 8. (a) Any applicant or affected insurer has the right of
appeal to the association. A decision of the association may be
appealed to the commissioner within 30 days after such decision.
(b) All orders or decisions of the commissioner made
pursuant to this Act are subject to judicial review in accordance
with Subchapter D, Chapter 36, of this code.
Immunity from Liability
Sec. 9. There is no liability on the part of, and no cause of
action against insurers, the inspection bureau, the association,
the governing committee, their agents or employees, or the
commissioner or the commissioner's authorized representatives,
with respect to any inspections required to be undertaken by this
Act or for any acts or omissions in connection therewith, or for any
statements made in any report and communication concerning the
insurability of the property, or in the findings required by the
provisions of this Act, or at the hearings conducted in connection
with such inspections.
Insolvency
Sec. 10. In the event any participating insurer fails, by
reason of insolvency, to pay any assessment, the association shall
cause the reimbursement ratios to be immediately recalculated,
excluding therefrom the amount of the insolvent insurer's
assessment determined by the commissioner to be uncollectible, so
that such uncollectible amount is, in effect, assumed and
redistributed among the remaining participating insurers.
Assessments and Premium Surcharges
Sec. 11. Should a deficit occur in the association, the
association, at the direction of the commissioner, shall either
request the issuance of public securities as authorized by Article
21.49A-1 of this code or assess participating insurers in
accordance with this section. As reimbursement for assessments
paid under this section or service fees paid under Article 21.49A-1
of this code, each insurer may charge a premium surcharge on every
property insurance policy issued by it insuring property in this
state, the effective date of which policy is within the three-year
period commencing 90 days after the date of assessment by the
association under this section or commencing 90 days after payment
of a service fee under Article 21.49A-1 of this code. The amount of
the surcharge shall be calculated on the basis of a uniform
percentage of the premium on such policies equal to one-third of the
ratio of the amount of an insurer's assessment or service fee
payment to the amount of its direct earned premiums as reported in
its financial statement to the department for the calendar year
immediately preceding the year in which the assessment is made,
such that over the period of three years the aggregate of all such
surcharges by an insurer shall be at least equal to the amount of
the assessment or service fee payment of such insurer. The amount
of any assessment paid and surcharged under this section may be
carried by the member insurer as an admitted asset of the insurer
for all purposes, including exhibition in annual statements under
Section 862.001 of this code, until collected. The commissioner
shall adopt rules and procedures as necessary to implement this
section.
Sanctions
Sec. 12. If the association, inspection bureau, or
participating insurer is found to be in violation of or in failure
to comply with this Act, each entity shall be subject to the
sanctions authorized in Chapter 82 of this code and administrative
penalties authorized under Chapter 84 of this code. The
commissioner may also utilize any other disciplinary procedures
authorized by this code, including the cease and desist procedures
authorized by Chapter 83 of this code.
Annual Report
Sec. 13. The association shall compile a calendar year annual
operating report and submit such annual report to the commissioner
on or before March 31 of the following calendar year. This annual
report shall be a matter of public record.
Powers of the Commissioner
Sec. 14. (a) In addition to any powers conferred upon the
commissioner by this or any other law, the commissioner is charged
with the authority to supervise the association and the inspection
bureau. In addition, the commissioner has the power:
(1) to examine the operation of the association and the
inspection bureau through free access to all the books, records,
files, papers, and documents relating to their operation and may
summon, qualify, and examine as witnesses all persons having
knowledge of such operations, including the governing committee,
officers, or employees thereof;
(2) to do all things necessary to enable the State of Texas
and the association to fully participate in any federal program of
reinsurance which may be enacted for purposes similar to the
purposes of this Act;
(3) to require such reports from the association concerning
risks insured by the association pursuant to this Act as may be
deemed necessary; and
(4) to adopt policy forms, endorsements, rates, and rating
and rule manuals for use by the association.
Retention of Profits
Sec. 15. The association shall retain any profits of the
association to be used for the purposes of the association. The
profits of the association shall be used to mitigate losses,
including the purchase of reinsurance and the offset of future
assessments, and may not be distributed to insurers.
Assets of Association
Sec. 16. On dissolution of the association, all assets of the
association shall be deposited in the general revenue fund.
Added by Acts 1995, 74th Leg., ch. 415, Sec. 6, eff. Aug 21.49A-1 21.49B 21.49C 21.50
Last modified: August 11, 2007
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