A bill that will allow eligible surplus lines insurers to provide windstorm and hail insurance, notwithstanding available coverage through the Texas Windstorm Insurance Association (TWIA), has passed into law in Texas, effective June 14, 2019. Under the law, a diligent effort will still be required, but available TWIA coverage will not limit the amount of insurance that can be procured in the surplus lines market.
HB 1940 easily passed both the Texas House of Representatives and Texas Senate during the 86th legislative session before it was sent to Gov. Greg Abbott on May 24, 2019. Gov. Abbott signed the bill on June 14, 2019, and it became law.
The bill amends Texas Insurance Code, Chapter 981, Section 981.004, related to authorized surplus lines coverage. The bill became effective immediately as it received at least two-thirds votes from members of each legislative chamber and was signed by the Governor on June 14, 2019.
Rep. Eddie Lucio III, sponsor of the bill, has noted that there is confusion in the market as to whether surplus lines insurers may lawfully provide coverage to those in TWIA’s coverage area. With HB 1940’s passage, it is clear that eligible surplus lines insurers may provide insurance to these consumers, without regard to the availability of TWIA coverage. This may expand windstorm and hail insurance coverage in the state and lead to increased options for Texas insureds.
A bill passed by the Texas Legislature this session that creates a diligent effort exemption for flood insurance policies in the surplus lines market has been signed by Gov. Greg Abbott. The bill, HB 1306, will take effect September 1, 2019, for any new or renewal policies issued on or after January 1, 2020. A diligent effort will still be required of agents for flood insurance policies whose policy period begins before January 1, 2020.
Under the new law, surplus lines agents are not required to conduct a diligent effort search to obtain flood insurance through the admitted market before placing it in the surplus lines market. However, the law does require that the eligible surplus lines insurer issuing the coverage has a financial strength rating of A- or better from the A. M. Best Company.
During the 86th legislative session, the bill was passed easily by both the Texas House of Representatives and the Texas Senate. The goal of the new law is to expand access to flood insurance in the private market, which offers alternatives to the National Flood Insurance Program.
A bill to improve flood insurance affordability has been introduced in Congress by Congressmen David Scott and Sean Duffy, of Georgia and Wisconsin, respectively. H.R. 3146, or the Fair Flood Insurance Act, would provide consumers with the option to pay flood insurance premiums monthly instead of as a single large payment.
Scott and Duffy both serve as members of the House Financial Services Committee, which has jurisdiction over insurance matters. The bill was first introduced on June 5, 2019, and has not yet been considered by committee, nor the House or Senate as a whole.
“My legislation is designed to ease the financial barriers many homeowners face when purchasing necessary flood insurance to protect their homes,” Scott said. “While we don’t know when the next storm will hit, we must ensure that homeowners and renters do not drown in the financial aftermath. The Fair Flood Insurance Act will make insurance more affordable and financially empower consumers to protect their homes and families.”
After 140 days, the Texas Legislature adjourned the 86th legislative session on Monday, May 27, 2019. Overall, more than 4,500 bills and resolutions were passed by the state Senate and House of Representatives.
Two bills of interest that impact the surplus lines industry were passed, while others were reviewed but did not make it through the legislature before session ended. HB 1306, which creates a diligent effort exemption for flood insurance issued by an eligible surplus lines insurer with a financial strength rating of A- or better from the A.M. Best Company, was easily passed by both chambers. It was sent to the governor’s office and will take effect September 1, 2019. HB 1940, a bill allowing eligible surplus lines insurers to provide windstorm and hail insurance, even if coverage is available through TWIA, was also passed easily and will take effect September 1, 2019.
HB 1648, which would require arbitration under a surplus lines insurance contract covering a Texas risk to be conducted in Texas, was placed on the House’s calendar but was never voted on in either chamber. Additionally, HB 3076 was not heard in committee and did not progress through the legislature. That bill would have created the Texas Tornado and Wildfire Insurance Association, an insurer of last resort for tornado and wildfire coverage.
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.
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.
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.
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.
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.
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.