TITLE exempt-filings

Texas Department of Insurance

Exept Filing Notification Pursant to the Insurance Code Chapter 5, Subchapter L, Article 5.96

PROPOSED

ADOPTION OF AMENDMENTS TO THE TEXAS PERSONAL LINES MANUAL TO ESTABLISH AN OPTIONAL PREMIUM CREDIT FOR INSTALLATION OF AN APPROVED DRY HYDRANT

The Commissioner of Insurance has adopted amendments to the Texas Personal Lines Manual (Manual) to establish optional premium credits for residential property insurance policies for the installation of an acceptable dry hydrant within 1000 feet of a residential risk that is located in an unprotected area. The Manual rules were proposed by Department staff in a petition filed on November 14, 1996. Notice of the proposal (Reference Number P-1196-52-I) was published in the December 20, 1996 issue of the Texas Register (21 TexReg 12332). The Manual rules were considered at a public hearing on January 22, 1997, at 9:00 a.m., under docket number 2276 in Room 100 of the Texas Department of Insurance Building, 333 Guadalupe Street in Austin, Texas.

The Commissioner has adopted, without changes to the proposal as noticed in the Texas Register , amendments to the Homeowners, Dwelling, Farm and Ranch Owners, and Farm and Ranch Sections of the Manual to establish an optional premium credit for residential property insurance policies for the installation of a dry hydrant that meets the recommended specifications.

The adopted amendments to each section of the Manual are as follows:

(1) In the Homeowners Section, Manual Rule VI-C is amended to add new item 7 "Water Supply Points (Dry Hydrants)."

(2) In the Dwelling Section, Manual Rule VI-C is amended to add new item 5 "Optional Dwelling Credits."

(3) In the Farm and Ranch Owners Section, Manual Rule VI-C is amended to add new item 7 "Water Supply Points (Dry Hydrants)."

(4) In the Farm and Ranch Section, Manual Rule VI-D is amended to add new item 4 "Optional Farm and Ranch Credits."

These rules specify the following standards that dry hydrants must meet to qualify for the credit:

(1) Water supply points must be designed and certified by a registered engineer, hydrologist, geologist, or soil conservationist to provide a minimum of 30,000 gallons of water during a drought with an average 50 year cycle or an insurer may accept a less stringent standard.

(2) The risk must be located in an unprotected area and within 1,000 feet of the supply point and within five miles of the responding fire station.

(3) The responding fire apparatus must have drafting capability.

(4) The responding department must verify on an annual basis that the supply point is operational, maintained, and accessible to fire apparatus at all times. The rules provide optional premium credits of up to 10% for Homeowners, Dwelling, Farm and Ranch Owners, and Farm and Ranch policies for the installation of a dry hydrant that meets the specifications.

Commissioner's Order Number 94-1029 created the Residential Property Insurance Loss Mitigation Advisory Committee (Advisory Committee). The purpose of the Advisory Committee is to advise and make recommendations to the Commissioner of Insurance on reducing residential property insurance losses. The Advisory Committee recognized that the amount of losses paid is an important factor in determining insurance rates because a significant reduction in the amount of losses paid would ultimately reduce residential property rates in Texas. Furthermore, the Advisory Committee recognized that many of the losses that occur might be eliminated or reduced through preventative measures employed by the insured to mitigate or prevent property losses.

To reduce residential fire losses, the Advisory Committee recommended a credit for the installation of a dry hydrant for fire protection in rural or unprotected areas. The Advisory Committee noted that a large number of Texans are migrating from urban population centers into unprotected small subdivisions and rural communities. With this population movement into unprotected rural areas, wildfires which once burned only brush and grass now have the potential to destroy homes and property with increasing frequency.

A dry hydrant consists of a supply pipe connected to the hydrant and to a nearby body of water for the purpose of allowing a pumper truck to draft water directly from the water supply through the hydrant in order to fight a residential fire. Although a dry hydrant does not provide as much protection as a fire hydrant connected to a water distribution system, the availability of a dry hydrant near residential property affords fire protection. Currently, dry hydrants are not recognized in Texas as an acceptable means of fire protection for the purposes of reducing the cost of insurance in rural or unprotected areas.

The Advisory Committee recommended that dry hydrants be recognized as a viable means of fire protection in rural and unprotected areas and by amending the Homeowners, Dwelling, Farm and Ranch Owners and Farm and Ranch Sections of the Texas Personal Lines Manual to provide an optional credit of up to (10%) for the installation of an acceptable dry hydrant within 1,000 feet of a residential risk which is located in an unprotected area. The Commissioner determined that the credit for installation of a dry hydrant would create an incentive for property owners to install dry hydrants in fire-prone unprotected areas. By bolstering fire protection in these unprotected areas through the installation of dry hydrants, losses from wildfires could be reduced thus allowing for a decrease in residential property insurance rates. Based on the recommendation of the Advisory Committee, information provided by staff, and the testimony provided at public hearing the Commissioner has adopted the four amendments to the Texas Personal Lines Manual establishing an optional credit of up to 10% for dry hydrant installation.

The Commissioner has jurisdiction of this matter pursuant to the Insurance Code, Articles 5.101, 5.96, and 5.98.

The Manual rules as adopted by the Commissioner of Insurance are on file in the Chief Clerk's Office of the Texas Department of Insurance under Reference Number P-1196-52-l and are incorporated by reference in the Manual by Commissioner's Order Number 97-0093.

This notification is made pursuant to the Insurance Code, Article 5.96, which exempts action taken under Article 5.96 from the requirements of the Administrative Procedure Act (Government Code, Title 10, chapter 2001).

Consistent with the Insurance Code, Article 5.96(h), prior to the effective date of this action, the Texas Department of Insurance will notify all insurers affected by this action.

IT IS THEREFORE THE ORDER of the Commissioner of Insurance that Texas Personal Lines Manual Rules, Rule VI-C in the Homeowners Section, Rule VI-C in the Dwelling Section, Rule VI-C in the Farm and Ranch Owners Section, Rule VI-D in the Farm and Ranch Section, as specified herein and which are attached to this Order and incorporated into this Order by reference, are adopted to be effective April 1,1997.

This agency hereby certifies that the adopted Manual rules have been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Issued in Austin, Texas, on January 31, 1997.

TRD-9701472

Caroline Scott

General Counsel and Chief Clerk

Texas Department of Insurance

Effective date: April 1, 1997