Legislative

Texas Bill Allocates $3 Billion to Flood Control Projects

The Texas House of Representatives has passed a bill that would pull more than $3 billion from the state’s rainy-day fund to pay for flood control projects.

At the beginning of this year’s legislative session, SB 7 was one of Lt. Gov. Dan Patrick’s 30 priority bills for 2019. The bill was passed by the Senate in March and taken up by the House last week. An amendment by Rep. Dade Phelan combines the Senate’s version with a House alternative, creating two funds that will provide grants and loans for flood control and mitigation projects.

The funds created would be the Flood Infrastructure Fund, which would assume $3.3 billion from the state’s Economic Stabilization Fund, and the Texas Infrastructure Resiliency Fund, which would allow cities and counties to apply for grants or low-interest loans for projects through the Texas Water Development Board.

Another Successful Legislative Session for E&S Insurance

As the last day of the 86th Texas Legislature approaches, the Texas Senate passed two (2) bills that will both impact and solidify the surplus lines industry expansion within the flood, hail and wind arenas.

HB 1306 will create a diligent effort exemption for flood insurance coverage for eligible surplus lines insurers who have a financial strength rating of A- or better from the A.M. Best Company.

HB 1940 states that available coverage from the Texas Windstorm Insurance Association (TWIA) does not preclude an eligible surplus lines insurer from providing windstorm and hail insurance.

Both laws were voted on by the Senate on Monday, May 20, 2019, after first being passed by the state House of Representatives. Each act is set to take effect on September 1, 2019. As the Senate did not make amendments to either bill, they will now be sent to the Governor, who has until Sunday, June 16, 2019, to sign, veto, or allow them to pass into law without a signature.

HB 1306 Passes Senate Committee

A bill that would allow flood coverage to be exported to the surplus lines market in Texas, HB 1306, has been reported favorably by the Texas Senate Business and Commerce Committee without amendments, by a vote of 8-0, with 1 member absent.

During a committee meeting on Tuesday, May 7, 2019, Sen. Kelly Hancock, Chair of the Business and Commerce Committee, noted that there are limits on the sale of flood policies in the surplus lines market if an admitted carrier offers the same product.

“In the past few years, there have been a number of flood events in Texas that continue to underscore the importance of flood insurance protections,” Hancock said. “The bill will provide another tool for Texans to be able to access the coverage, if they choose, by allowing qualified surplus lines insurers to provide flood insurance coverage.”

The bill’s committee report has been distributed, but it has not yet been scheduled for a floor reading in the full Senate.

Texas Legislature Hears TWIA Bills

Several bills affecting the Texas Windstorm Insurance Association (TWIA) are currently pending in the Texas Legislature.

HB 4534, which relates to TWIA’s rates and other funding, was passed by the state House of Representatives on May 3, 2019, by a vote of 132-10. The bill would introduce several changes to how TWIA pays claims and funds the Catastrophe Reserve Trust Fund (CRTF), a funding source containing the net gains from TWIA operations from prior years.

The bill has been received by the Texas Senate but has not yet been referred to a committee.

The TWIA Sunset Bill, SB 615, has already been passed by the Senate, 30-1, and has now been passed out of the House Insurance Committee, 7-0. The bill includes updates to TWIA operations and determines that the organization will undergo a Sunset review again in 12 years. A Sunset Advisory Committee adopted several recommendations that would increase TWIA effectiveness and efficiency, and the bill aims to meet those goals.

A bill related to denial of TWIA claims, HB 2686, was passed by the House Insurance Committee with a vote of 7-1 but failed to pass to engrossment by the full House.

Tornado, Wildfire Insurer of Last Resort Bill Not Likely to Pass

A bill that would have created the Texas Tornado and Wildfire Insurance Association, a residual insurer of last resort for tornado and wildfire insurance in Texas, will likely not make it out of committee in the Texas Legislature.

HB 3076 was filed in March by Rep. Ken King. The bill was originally referred to the state House of Representatives Committee on Insurance on March 13, 2019, but it has never been called up for discussion.

With only weeks left in the 86th Legislative Session, many bills have been passed by the House and Senate, but still more have yet to make it to the floor of one or both chambers. As of May 9, 2019, more than 10,000 bills and resolutions have been filed by the House and Senate, while about 2,200 have been passed by both houses.

The Legislature will adjourn on Monday, May 27, 2019, but the House and Senate both adhere to rules dictating the last day for a bill to be read in the chamber before the final day. With so many bills to consider, HB 3076 will not be the only one to not become law this session.

Texas Senate to Hear HB 1940

Following its passage by the Senate Business and Commerce Committee, the full Senate will soon hear HB 1940, a bill that will allow eligible surplus lines insurers to provide windstorm and hail insurance, regardless of available coverage through the Texas Windstorm Insurance Agency (TWIA).

Sen. Brandon Creighton laid out the bill for the committee, noting that under it, residents would be free to purchase coverage from TWIA or a surplus lines insurer willing to insure their property.

“This would expand the insurance options to tier 1 county residents, without changing or limiting their access to TWIA and other markets,” Creighton said. “House Bill 1940 would complement TWIA’s effort to depopulate, as every policy written by a surplus lines insurer would be one less policy that would require insurance through TWIA.”

Beaman Floyd, Director of the Texas Coalition for Affordable Insurance Solutions, spoke briefly in favor of the bill, stating that it would bring additional insurance capital to the seacoast tier 1 space.

The Senate committee voted to pass the bill on Thursday, May 2, 2019, with a vote of 8-0, with one member absent.

Legislative Deadlines Approach in Texas

As the 86th Texas Legislature continues, session deadlines are fast approaching. The session, which began on Tuesday, January 8, 2019, will adjourn on Monday, May 27, 2019.

With nearly 10,000 bills and resolutions filed in the Texas Senate and Texas House of Representatives, only about 1,900 have been passed by both the Senate and House. A large majority of these are resolutions to recognize individuals or organizations. As of April 30, only 20 bills had been passed. While 50 resolutions have been signed by the Governor, no bills have progressed this far.

Each chamber of the Legislature follows rules that dictate deadlines for certain actions that must be taken. The chart below provides more information on dates of action in the Texas Senate and House.

On the last day of session, only corrections can be made in the Senate and House. Gov. Greg Abbott may sign or veto bills that were passed during session until the 20th day following adjournment, or Sunday, June 16, 2019. Any bills passed during the regular session that did not include a specific effective date will take effect on Monday, August 26, 2019, on the 91st day following final adjournment of the 86th Legislature.

HB 1940 Referred to Senate Committee

HB 1940, which would allow eligible surplus lines insurers to write windstorm and hail insurance, even if coverage is available from the Texas Windstorm Insurance Association (TWIA), was referred to the Senate Business and Commerce Committee on Tuesday, April 16, 2019.

The bill, authored by Rep. Eddie Lucio III, was passed by the House Insurance Committee by a vote of 8-0, with one member absent. It was passed by the House on Friday, April 12, 2019. It has now been received by the Senate, where it will be heard in committee. If the bill moves forward, it will be heard by the full Senate.

The bill’s identical companion, SB 2444, was referred to the Senate Business & Commerce Committee but has not yet been heard.

HB 1306 Passes Texas House

The Texas House of Representatives has passed HB 1306, a bill that allows flood insurance to be exported to the surplus lines market. Under the bill, flood coverage issued by an eligible surplus lines insurer with a financial strength rating of A- or better from A.M. Best does not require a diligent effort search.

Rep. John Frullo first introduced the bill on February 1, 2019. It was referred to the House Insurance Committee before it passed 7-0, with 2 members of the Committee not voting. The bill then was laid on the floor of the House on Thursday, April 18, 2019, where it passed without objection.

The bill has now been received in the Senate, where it will be referred to a Senate Committee. If the bill passes, it will be heard before the full Senate.

Insurance Bills Progress in Texas House

Bills impacting surplus lines insurance filed in the Texas House of Representatives have moved closer to becoming law. HB 1940, relating to the eligibility of surplus lines insurers to provide windstorm and hail coverage, despite available coverage by the Texas Windstorm Insurance Association (TWIA), was passed by the House on Friday, April 12, 2019. The bill has now been received by the Senate.

The Senate companion bill, SB 2444, was referred to the Senate Business & Commerce Committee, but has yet to be heard in committee.

HB 1648 provides that a surplus lines insurance contract containing an arbitration clause must specify that the arbitration will be conducted in Texas, governed by Texas law, and the insurance contract will be interpreted in accordance with state law. The bill was first referred to the House Insurance Committee in March, and is scheduled for public hearing on Tuesday, April 16, 2019.

A bill to create a diligent effort exclusion for flood insurance in the surplus lines market, HB 1306, will be considered by the House on Thursday, April 18, 2019. The bill was reported favorably by committee on Wednesday, April 10, 2019.

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