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Texas Insurance Code - Not Codified - Article 21.50. Mortgage Guaranty Insurance
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Art. 21.50. MORTGAGE GUARANTY INSURANCE.
Article repealed effective April 1, 2007
Definitions
Sec. 1. The definitions set forth herein shall govern the
construction of the terms used in this Article but shall not affect
any other provisions of this Code.
(a) "Mortgage guaranty insurance" means:
(1) Insurance against financial loss by reason of
nonpayment of principal, interest and other sums agreed to be paid
under the terms of any note or bond or other evidence of
indebtedness secured by an authorized real estate security
constituting a lien or charge on real estate, provided the
improvement on such real estate is a residential building or
buildings designed for occupancy by not more than four families, or
a condominium unit.
(2) Insurance against financial loss by reason of
nonpayment of principal, interest and other sums agreed to be paid
under the terms of any note or bond or other evidence of
indebtedness secured by an authorized real estate security
constituting a lien or charge on real estate, provided the
improvement on such real estate is a building or buildings designed
for occupancy by five or more families or designed to be occupied
for industrial or commercial purposes.
(3) Insurance against financial loss by reason of
nonpayment of rent and other sums agreed to be paid under the terms
of a written lease for the possession, use or occupancy of real
estate, provided the improvement on such real estate is a building
or buildings designed to be occupied for industrial or commercial
purposes.
(b) "Authorized real estate security" for the purposes of
Paragraphs (1) and (2) of Subdivision (a) of this section means
either:
(1) A note, bond or other evidence of indebtedness, secured
by a mortgage, deed of trust, wraparound mortgage or other
instrument which constitutes or is considered by the Federal
National Mortgage Association, the Federal Home Loan Mortgage
Corporation, the Federal Home Loan Bank Board, their successors, or
agency of this State or of the federal government to be the
equivalent of a first lien or charge on real estate; provided:
(A) The real estate loan secured in such manner is a type of
loan which a bank, savings and loan association, credit union or an
insurance company, which is supervised and regulated by a
department of this State or an agency of the federal government or a
mortgage banker which is an approved seller-servicer of the Federal
National Mortgage Association, Federal Home Loan Mortgage
Corporation, or their successors, is authorized to make, or a type
of loan which is approved by the Secretary of Housing and Urban
Development for participation in any mortgage insurance program.
(B) The improvement on such real estate is a building or
buildings designed for occupancy as specified by Paragraphs (1) and
(2) of Subdivision (a) of this section.
(C) The lien on such real estate may be subject and
subordinate to the following:
(i) The lien of any public bond, assessment, or tax, when no
installment, call or payment of or under such bond, assessment or
tax is delinquent.
(ii) Outstanding mineral, oil or timber rights,
rights-of-way, easements or rights-of-way support, sewer rights,
building restrictions or other restrictions or covenants,
conditions or regulations of use, or outstanding leases upon such
real property under which rents or profits are reserved to the owner
thereof.
(2) A note, bond or other evidence of indebtedness secured
by a proprietary lease and a stock membership certificate issued to
a tenant stockholder or resident member of a fee simple cooperative
housing corporation as defined in Section 216 of the United States
Internal Revenue Code.
(c) "Contingency reserve" means an additional premium
reserve established for the protection of policyholders against the
effect of adverse economic cycles or losses.
Policy Forms; Rates and Rate Information; Filing Requirements
Sec. 1A. (a) The procedures as set forth herein shall govern
mortgage guaranty insurance as defined in this article but shall
not affect any other of the provisions of this code.
(b) All policy forms, related forms, classifications, and
rules used by a mortgage guaranty insurer in this state shall be
exempt from approval by the board, but all such policy forms,
related forms, classifications, and rules which are to be used in
this state, except those filed under Subsection (l), shall be filed
with the board at least 15 days before they are to become effective.
The board may, after a hearing held on not less than 20 days'
notice, specifying the matters to be considered at such hearing, to
every insurer which made such filing, and upon finding that such
filing is no longer in the best interest of the public of this
state, issue an order suspending such exemption as to any or all
insurers which made such filings and ordering such insurers to
cease and desist from the use of such policy forms, related forms,
classifications, and rules as the board may specify in its order.
(c) No policy of mortgage guaranty insurance shall contain a
provision which allows subrogation rights or any other claim by the
insurer against the borrower for a deficiency arising from a
foreclosure sale of a single-family dwelling occupied by the
borrower as the principal residence of the borrower. The
commissioner shall disapprove any such form if:
(1) It is in any respect in violation of or does not comply
with this code or rules adopted by the commissioner.
(2) It contains provisions which encourage
misrepresentation or are unjust, unfair, inequitable, misleading,
deceptive, or contrary to law or to the public policy of this state.
(d) The commissioner may, after notice and hearing, adopt
reasonable rules relating to the minimum standards for coverage
under such policy forms consistent with the purpose of this article
and the public policy of this state.
(e) The board may, after notice and hearing, adopt
reasonable rules and amendments to rules that are necessary for it
to establish guidelines, procedures, methods, standards, and
criteria by which the various and different types of forms and
documents submitted to the board are to be reviewed and acted on by
the board.
(f) A mortgage guaranty insurer shall file with the board
all rates and supplementary rate information and all changes and
amendments thereto which are to be used in this state at least 15
days before they are to become effective. Rates, rating plans, and
charges shall not be excessive, inadequate, or unfairly
discriminatory and shall be reasonable with respect to the benefits
provided.
(g) On any filing of rates or changes and amendments to
these rates, the insurer shall file adequate supporting data,
including:
(1) information on past and prospective loss experience
within and outside the state, on catastrophe hazards, on expenses
of operation, on a reasonable margin for profit and contingencies;
(2) an explanation of the filer's interpretation of any
statistical data relied on by it;
(3) an explanation and description of the methods used in
making the rates;
(4) certification by an appropriate official of the insurer
relating to the appropriateness of the charges, rates or rating
plans based on reasonable assumptions and accompanied by adequate
supporting information.
(h) The board may establish requirements for data and
information to be filed under this article.
(i) The board shall, after due consideration, promulgate
reasonable rules and statistical plans which may be modified from
time to time and which shall be used thereafter by each insurer in
the recording and reporting of its loss experience and such other
data as may be required, in order that the total loss and expense
experience of all insurers may be made available in such form and
detail as may be deemed necessary by the board.
(j) Nothing in this Act shall be considered as compelling
the State Board of Insurance to establish standard and absolute
rates and the board is specifically authorized, in its discretion,
to accept different rates for different insurers for the same risk
or risks on the types of insurance covered by this article; nor
shall this article be construed as to require the board to establish
a single and uniform rate for each risk or risks or to compel all
insurers to adhere to such rates previously filed by other
insurers; and the board is empowered to accept such different rates
for different insurers as filed by any qualified insurer unless it
finds that such filing does not meet the requirements of this
article.
(k) If at any time the board finds that a policy form or rate
filing no longer meets the requirements of this code, it may, after
a hearing held on not less than 20 days' notice, specifying the
matters to be considered at such hearing, to every insurer which
made such filing, issue an order withdrawing its approval thereof.
Said order shall specify in what respects the board finds that such
filing no longer meets the requirements of this code and shall be
effective not less than 30 days after its issuance.
(l) Policies providing coverage for a pool or group of loans
in connection with the issuance of mortgage-backed securities or
bonds shall be exempt from approval by the board under Subsection
(b) of this section, but all such policy forms, related forms,
classifications, and rules which are to be used in this state shall
be filed with the board at least 15 days after they are to become
effective. Mortgage guaranty insurers are prohibited from
discrimination in the issuance or extension of mortgage guaranty
insurance on the basis of the applicant's sex, marital status,
race, color, creed, national origin, disability, age, or solely on
the geographic location of the property unless (1) the
discrimination related to geographic location of the property is
for a business purpose that is not a mere pretext for unfair
discrimination; or (2) the refusal, cancellation, or limitation is
required by law or regulatory mandate.
Notice to Borrower
Sec. 1B. (a) A lender that requires a borrower to purchase
mortgage guaranty insurance shall provide annually to the borrower
a copy of the following written notice printed in at least 10-point
bold-faced type:
"NOTICE OF RIGHT TO CANCEL PRIVATE MORTGAGE INSURANCE: If
you currently pay private mortgage insurance premiums, you may have
the right to cancel the insurance and cease paying premiums. This
would permit you to make a lower total monthly mortgage payment and
to possibly receive a refund of any unearned premiums on the policy.
In most cases, you have the right to cancel private mortgage
insurance if the principal balance of your loan is 80 percent or
less of the current fair market appraised value of your home. If
you want to learn whether you are eligible to cancel this insurance,
please contact us at (address and telephone number of lender) or the
Texas Department of Insurance consumer help line at (the
appropriate toll-free telephone number)."
(b) If a lender receives a refund of an unearned mortgage
guaranty insurance premium paid by a borrower, the lender shall
remit the refund to the borrower not later than the 10th business
day after the date on which the lender receives the refund.
(c) If federal law requires a lender to provide a borrower
with a written notice containing substantially the same information
required by Subsection (a) of this section, a lender who provides
the notice required by federal law within the period prescribed by
federal law satisfies the notice requirement of Subsection (a) of
this section.
(d) In this section, "lender" has the meaning assigned by
Section 1(1), Article 21.48A, of this code.
Qualifications of Insurers
Sec. 2. Qualifications for mortgage guaranty insurers shall
be as follows:
(1) An insurer, in order to qualify for writing mortgage
guaranty insurance, must have the same minimum capital and surplus
as that required of a company by Chapter 8, Texas Insurance Code.
(2) A foreign or alien insurer writing mortgage guaranty
insurance shall not be eligible for the issuance of a certificate of
authority in Texas unless it has demonstrated a satisfactory
operating experience in its state of domicile.
(3) A mortgage guaranty insurer which anywhere transacts
any class of insurance other than mortgage guaranty insurance is
not eligible for the issuance of a certificate of authority to
transact mortgage guaranty insurance in this State nor for the
renewal or continuance thereof.
(4) A mortgage guaranty insurer which anywhere transacts
the classes of insurance defined in Paragraphs (2) and (3) of
Subdivision (a) of Section 1 is not eligible for the issuance or
continuance of a certificate of authority to transact in this State
the class of mortgage guaranty insurance defined in Paragraph (1)
of Subdivision (a) of Section 1.
Unearned Premium Reserve; Computation
Sec. 3. The unearned premium reserve on mortgage guaranty
insurance shall be computed in accordance with the other applicable
sections of this Code, except that on all policies covering a risk
period of more than one year the unearned premium reserve shall be
computed in accordance with standards promulgated by the State
Board of Insurance after appropriate hearings.
Loss Reserve; Determination
Sec. 4. On such insurance, the case basis method shall be used
to determine the loss reserve, which shall include a reserve for
claims incurred but not reported.
Contingency Reserve; Withdrawals; Releases to Surplus
Sec. 5. In addition to the capital, surplus and reserves
specified in Sections 2, 3 and 4 hereof, each mortgage guaranty
insurer shall establish a contingency reserve, which shall be
reported as a liability in the insurer's financial statements. To
provide for and maintain such reserve, the company shall annually
contribute to such reserve fifty per cent (50%) of the earned
premiums on its mortgage guaranty insurance business. The earned
premiums so reserved may be released to the insurer's surplus,
annually, after they have been so maintained for 120 months.
However, withdrawals may be made from such reserve by the insurer in
any given year in which the insurer can demonstrate to the State
Board of Insurance that the incurred losses for such year exceed
thirty-five per cent (35%) of the corresponding earned premiums for
such year. The amount so withdrawn and released for such losses
shall reduce any subsequent annual release to surplus from the
established contingency reserve by an amount equal to the amount so
withdrawn, and any balance in excess of the normal annual release
from such reserve shall carry over and be deducted from subsequent
annual releases.
Outstanding Total Liability; Limit
Sec. 6. A mortgage guaranty insurer shall not at any time have
outstanding a total liability, net of reinsurance, under its
aggregate mortgage guaranty insurance policies exceeding 25 times
its capital, surplus and contingency reserve, such liability to be
computed on the basis of the insurer's liability under its election
as provided in Section 7 and such liability for leases to be
computed on the basis of the insurer's liability as determined by
the State Board of Insurance. In the event that any insurer has
outstanding total liability exceeding 25 times its capital, surplus
and contingency reserve, it shall cease transacting new mortgage
guaranty business until such time as its total liability no longer
exceeds 25 times its capital, surplus and contingency reserve.
Limit on Coverage to Amount of Indebtedness; Election to Pay Entire
Indebtedness
Sec. 7. A mortgage guaranty insurer shall limit its coverage,
net of reinsurance, for the class of insurance defined in
Paragraphs (1) and (2) of Subdivision (a) of Section 1 to a maximum
of twenty-five per cent (25%) of the entire indebtedness to the
insured, or in lieu thereof, a mortgage guaranty insurer may elect
to pay the entire indebtedness to the insured and acquire title to
the authorized real estate security.
Loans Secured by Properties in Single-housing or Contiguous Tracts;
Limit
Sec. 8. A mortgage guaranty insurer shall not insure loans
secured by properties in a single housing tract or a contiguous
tract in excess of ten per cent (10%) of the insurer's capital,
surplus and contingency reserve. In determining the amount of such
risk, applicable reinsurance in any assuming insurer authorized to
transact mortgage guaranty insurance in this State shall be
deducted from the total direct risk insured. "Contiguous," for the
purposes of this section, means not separated by more than one-half
mile.
Advertising of "Insured Loans"
Sec. 9. No bank, savings and loan association or insurance
company, or an approved seller-servicer of the Federal National
Mortgage Association, any of whose authorized real estate
securities are insured by a mortgage guaranty insurance company,
may state in any brochure, pamphlet, report or any form of
advertising that the real estate loans of the bank, savings and loan
association, insurance company or an approved seller-servicer of
the Federal National Mortgage Association are "insured loans"
unless the brochure, pamphlet, report or advertising also clearly
states that the loans are insured by private insurers and the names
of the private insurers are given and shall not make any such
statement at all unless such insurance is by an insurer
certificated to write in this State.
Application of Other Laws
Sec. 10. All the applicable provisions of this Code and of
other statutes of this State, except as the same may be in conflict
herewith, shall apply to the operation and conduct of mortgage
guaranty insurance business.
Added by Acts 1971, 62nd Leg., p. 1066, ch. 222, Sec. 1, eff. Aug.
30, 1971. Amended by Acts 1973, 63rd Leg., p. 22, ch. 19, Sec. 1,
eff. March 28, 1973.
Secs. 1, 2, 7 amended by Acts 1983, 68th Leg., p. 5395, ch. 998, Sec.
1, eff. Aug. 29, 1983; Sec. 1A added by Acts 1985, 69th Leg., ch.
147, Sec. 1, eff. Sept. 1, 1985; Sec. 1A amended by Acts 1993, 73rd
Leg., ch. 685, Sec. 20.18, eff. Sept. 1, 1993; Sec. 1B added by Acts
1997, 75th Leg., ch. 870, Sec. 1, eff. Jan. 1, 1998.
Article: 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 21.52B 21.53X 21.54 21.58A 21.58B 21.58C 21.61
Last modified: August 11, 2007
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