28 TAC §§5.9910 - 5.9929
The Commissioner of Insurance adopts new Subchapter T, §§5.9910-
5.9929, concerning the Fair Access to Insurance Requirements (FAIR) Plan of
Operation developed by the FAIR Plan Governing Committee and submitted for
approval to the Commissioner of Insurance pursuant to the Insurance Code Article
21.49A sec. 3(a). The subchapter is adopted without changes to the proposed
text as published in the April 4, 2003, issue of the
Texas Register
(28 TexReg 2873) and will not be republished.
Several insurance companies who together write over 50% of the Texas homeowners
insurance market are not currently writing new homeowners insurance policies.
The largest writer of homeowners insurance in Texas with over 30% of the market,
has not been writing new homeowners policies for over a year. Another large
writer of homeowners insurance with approximately 20% of the homeowners market
in force in Texas, is also not writing new homeowners policies. Many other
insurers have continued to maintain restrictions or limitations on writing
homeowners insurance and some insurers have withdrawn from the market. In
addition, according to statistics obtained from the Surplus Lines Stamping
Office of Texas, from March 31, 2002, to March 31, 2003, there has been a
169.1% increase in the homeowners premium written by surplus lines insurers,
which indicates a significant increase in the writing of homeowners policies
by surplus lines insurers. This increase is a clear indication that consumers
are having difficulty obtaining or are finding it impossible to obtain homeowners
insurance coverage through the voluntary market, and have had to obtain such
coverage in the surplus lines market. Based on all of these factors it is
possible that in some cases residential property homeowners are having to
go without insurance coverage, due to unavailability and other factors. In
addition, since the FAIR Plan Association started issuing policies on December
31, 2002, it has issued approximately 15,000 residential property insurance
policies, thus further evidencing the need for this program. Considering these
facts, it is clear that the consumers seeking new homeowners insurance coverage
are facing difficulty in obtaining or finding it impossible to obtain homeowners
insurance coverage through the voluntary market. The new sections are necessary
to implement Article 21.49A and to ensure that residential property insurance
coverage is available to Texas residents.
The purpose of adopted §§5.9910- 5.9929 is to set forth and establish
the structure, function, procedures and powers of the Texas FAIR Plan Association.
Adopted §5.9910 sets forth the purpose of the Texas FAIR Plan Association
(Association) as well as the purpose of the Plan of Operation. Adopted §5.9911
provides the definitions of terms to be used in the subchapter. Adopted §5.9912
provides for the formation and authority of the Governing Committee. Adopted §5.9913
sets forth the role of agents, minimum requirements and performance standards
for agents, and the procedure for the payment of commissions. Adopted §5.9914
provides for the maximum limits of liability and other limitations on FAIR
Plan policies. Adopted §5.9915 sets forth procedures for the inspections
of property to be insured under FAIR Plan policies and the requirements for
inspection reports. Adopted §5.9916 provides the procedures for adoption
of application forms and approval of underwriting rules, rates, policy forms,
and endorsements. Adopted §5.9917 sets forth the documentation the agents
are required to maintain regarding an applicant’s eligibility; rules
and procedures for issuance or cancellation of binders; and rules and procedures
for issuance, renewal, or cancellation of policies. Adopted §5.9918 sets
forth the Association’s options for servicing its policies and guidelines
for establishing servicing standards. Adopted §5.9919 sets forth the
appeals process for an applicant or affected insurer to appeal an action of
the Association. Adopted §5.9920 sets out the immunity from liability
and indemnification available to insurers, inspectors, the Association, the
Governing Committee, their agents and employees, the Association administrator,
the Commissioner, and the Commissioner’s authorized representatives.
Adopted §5.9921 authorizes the Association to purchase fidelity bonds
for the purpose of reimbursing the Association for losses sustained due to
fraud or dishonesty on the part of members of the Governing Committee, Association
officers, or employees. Adopted §5.9922 describes the member insurers
required to participate in the Association, how the proportions of participation
are determined, and the procedures for Association and member meetings. If
necessary, it provides the procedure for an initial assessment of the member
insurers to facilitate the commencement of operations. Adopted §5.9923
sets forth the procedures for member insurer assessments and recoupment of
assessments, for reapportioning assessments of an insolvent member insurer,
and for assessments of member insurers who cease writing property insurance
in Texas. Adopted §5.9924 sets forth the procedures for the Association
to cede or purchase reinsurance and acquire other financing. Adopted §5.9925
sets forth the statistical reporting requirements of the Association. Adopted §5.9926
provides for the Association’s treatment of excess funds. Adopted §5.9927
provides for the Association to file annual and quarterly financial statements.
Adopted §5.9928 lists the additional powers of the Association and adopted §5.9929
provides for the severability of any section of this subchapter, or the application
thereof, if it is determined to be invalid.
No comments were received regarding adoption of the new sections.
The sections are adopted under the Insurance Code Article 21.49A
and §36.001. Article 21.49A sec. 3(a) authorizes the FAIR Plan Governing
Committee to develop a plan of operation and submit it to the Commissioner
of Insurance for his approval. Article 21.49A charges the Commissioner with
the authority to supervise the Association and to approve and adopt by rule
the plan of operation developed by the Governing Committee. Section 36.001
provides that the Commissioner of Insurance may adopt rules to execute the
duties and functions of the Texas Department of Insurance only as authorized
by statute.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on May 8, 2003.
TRD-200302849
Gene C. Jarmon
General Counsel and Chief Clerk
Texas Department of Insurance
Effective date: May 28, 2003
Proposal publication date: April 4, 2003
For further information, please call: (512) 463-6327