TEXAS DEPARTMENT OF INSURANCENotification Pursuant to the Insurance Code, 
Chapter 5, Subchapter LAs required by the Insurance Code, Article 5.96 and 5.97, 
the Texas Register publishes notice of proposed actions by the Texas Board of 
Insurance. Notice of action proposed under Article 5.96 must be published in the 
Texas Register not later than the 30th day before the board adopts the proposal. 
Notice of action proposed under Article 5.97 must be published in the Texas 
Register not later than the 10th day before the Board of Insurance adopts the 
proposal. The Administrative Procedure Act, the Government Code, Chapters 2001 
and 2002, does not apply to board action under Articles 5.96 and 5.97.
The complete text of the proposal summarized here may be examined in the offices 
of the Texas Department of Insurance, 333 Guadalupe Street, Austin, Texas 78714-
9104.)
This notification is made pursuant to the Insurance Code, Article 5.96, which 
exempts it from the requirements of the Administrative Procedure Act.

Notification Pursuant to the Texas Insurance Code, Chapter 5, Subchapter
L, Article 5.96

PROPOSED
The Commissioner of Insurance will hold a public hearing under Docket Number 
2266 on December 9, 1996, at 9:00 a.m., in Room 102 of the Texas Department of 
Insurance Building, 333 Guadalupe Street, Austin, Texas, to consider a petition 
by staff of the Texas Department of Insurance proposing: (1) the adoption of 
form and rating rules in the Homeowners, Dwelling, Farm and Ranch, and Farm and 
Ranch Owners Sections of the Texas Personal Lines Manual (Manual) to govern the 
writing of policy forms and endorsements under the Property Protection Program 
(PPP); and (2) the adoption of premium charges and premium reductions for new 
endorsements adopted solely for use under the PPP. If adopted, the proposed 
rates and rules will be contained in a new subsection VII, entitled "Property 
Protection Program," in each of the four sections of the Manual. The proposed 
rules provide general instructions, eligibility requirements, a listing of 
optional endorsements and explanations for use, and rates and rating methods for 
the writing of PPP policy forms and endorsements. The proposed rates include 
premium charges and premium reductions for new endorsements adopted solely for 
use under the PPP. The adoption of these proposed rules and rates would not 
affect the rules and rates currently in effect that govern the writing of 
homeowners, dwelling, farm and ranch, and farm and ranch owners policy forms and 
endorsements adopted under Article 5.35 of the Insurance Code for general use in 
the entire state of Texas. The following is a summary of the proposed additions 
to the homeowners, dwelling, farm and ranch and farm and ranch owners sections 
of the Manual. These additions include proposed additions to or reductions in 
premium for new endorsements adopted solely for use under the PPP. 
A. Homeowners Section. Rule VII, Property Protection Program. 
1. Rule VII-A--General. This rule provides general instructions for the writing 
of the PPP homeowners policy, which insurers must offer through Homeowners 
Policy Form HO-A, and for endorsement forms adopted solely for use under the 
PPP. The rule also provides that in addition to the rules in subsection VII, all 
other rules contained in the Homeowners Section of the Manual governing the 
writing of Form HO-A, as well as optional additional coverages and endorsements 
to Form HO-A that have been adopted for use under the PPP and which are not in 
conflict with the proposed rules in subsection VII, shall apply to the writing 
of PPP homeowners policy and endorsement forms. The rule further provides that 
the flexibility percentages filed by individual companies for Texas Homeowners 
Policy Form HO-A will apply to the PPP homeowners policy and endorsement forms. 
2. Rule VII-B--Eligibility. This rule: (i) provides that a PPP homeowners policy 
(Form HO-A) may only be issued for property located in a Class 1 underserved 
area (as initially designated by Commissioner's Order Number 96-1118 (September 
24, 1996) pursuant to Article 5.35-3, sec.1), and includes a chart listing the 
Class 1 areas by ZIP Code, city and county; (ii) states that windstorm, 
hurricane and hail coverage for property located in an area designated as a 
catastrophe area by the Commissioner may not be provided under the PPP, and 
requires that an endorsement excluding such coverage be attached to each PPP 
homeowners policy issued; and (iii) states that PPP homeowners coverage may only 
be provided by Homeowners Policy Form HO-A. 
3. Rule VII-C--Optional Endorsements. This rule lists the endorsements that may 
be attached to a PPP homeowners policy (Form HO-A): (i) seven new PPP 
endorsements adopted by Commissioner's Order Number 95-1285 (December 8, 1995) 
pursuant to Article 5.35-3 and (ii) thirty endorsements adopted by 
Commissioner's Order Number 95-1285 that had previously been adopted pursuant to 
Article 5.35 for attachment to Texas Homeowners Policy Form HO-A. The rule 
includes a general description of each of the seven new endorsements adopted 
pursuant to Article 5.35-3. This description specifies whether the attachment of 
the endorsement requires a reduction in premium, an additional premium, or no 
additional premium. The proposed rule provides that the rates and rating rules, 
as set forth in the Homeowners Section of the Manual for the attachment of the 
thirty endorsements which previously have been adopted pursuant to Article 5.35 
for attachment to Texas Homeowners Policy Form HO-A, also shall apply to the 
attachment of these endorsements to a PPP homeowners policy. 
4. Rule VII-D--Rating Rules. This rule requires that the basic premium for the 
PPP homeowners policy (Form HO-A) is to be determined in the same manner and 
using the same premium charts as for a Texas Homeowners Policy Form HO-A. The 
proposed rule specifies the rates and rating methods for those PPP endorsements 
requiring a reduction in or addition to premium when attached to a PPP 
homeowners policy (Form HO-A) and proposes the following reductions or additions 
for these endorsements: 
(a) Exclusion of Coverage, Endorsement Number (PPP) HO-700 (reduction in premium 
for exclusion of coverage for the perils of (i) vandalism and malicious mischief 
and/or (ii) theft): Premium reductions for exclusions of vandalism and malicious 
mischief coverage vary by territory, from $12.00 to $1.00, as fully detailed in 
the petition and rule. Premium reductions for exclusions of theft coverage vary 
by territory and by amount of insurance, as fully detailed in a chart in the 
petition and rule. 
(b) Accidental Discharge, Leakage, or Overflow of Water or Steam and Freezing, 
Endorsement Number (PPP) HO-702 (additional premium): (Calculation of the 
additional premium to be charged for this endorsement requires input from 
insurers. This rate will be determined under a separate rulemaking procedure).
(c) Collapse of Building, Breakage of Glass, and Falling Objects, Endorsement 
Number (PPP) HO-703 (additional premium): An additional premium of $1.00, 
regardless of the limit of liability, is charged for the addition of these 
perils. 
B. Dwelling Section. Rule VII, Property Protection Program. 
1. Rule VII-A--General. This rule provides general instructions for the writing 
of the PPP dwelling policy, which insurers must offer through Texas Dwelling 
Policy Form TDP-1, and for endorsement forms adopted solely for use under the 
PPP. This rule also requires that all other rules contained in the Dwelling 
Section of the Manual which govern the writing of Form TDP-1, as well as 
optional additional coverages and endorsements to Form TDP-1 that have been 
adopted for use under the PPP and which are not in conflict with the proposed 
rules in subsection VII, shall apply to the writing of PPP dwelling policy and 
endorsement forms. The rule further provides that the flexibility percentages 
filed by individual companies which are applicable to the Texas Dwelling Policy 
Form TDP-1 will apply to the PPP dwelling policy and endorsement forms. 
2. Rule VII-B--Eligibility. This rule: (i) provides that a PPP dwelling policy 
(Form TDP-1) may only be issued for property located in a Class 1 underserved 
area, (as initially designated by Commissioner's Order Number 96-1118 (September 
24, 1996) pursuant to Article 5.35-3, sec.1) and includes a chart listing the 
Class 1 areas by ZIP Code, city and county; (ii) states that windstorm, 
hurricane and hail coverage for property located in an area designated as a 
catastrophe area by the Commissioner may not be provided under the PPP, and 
requires that an endorsement excluding such coverage be attached to each 
dwelling policy issued; and (iii) states that PPP dwelling coverage may only be 
provided by Dwelling Policy Form TDP-1. 
3. Rule VII-C--Optional Endorsements. This rule lists the endorsements that may 
be attached to a PPP dwelling policy (Form TDP-1): (i) eight new PPP 
endorsements adopted by Commissioner's Order Number 95-1285 (December 8, 1995) 
pursuant to Article 5.35-3 and (ii) twelve endorsements adopted by 
Commissioner's Order Number 95-1285 that had previously been adopted pursuant to 
Article 5.35 for attachment to Texas Dwelling Policy Form TDP-1. The rule 
includes a general description of each of the eight new endorsements adopted 
pursuant to Article 5.35-3. This description specifies whether the attachment of 
the endorsement requires a reduction in premium, an additional premium, or no 
additional premium. The proposed rule provides that the rates and rating rules, 
as set forth in the Dwelling Section of the Manual for the attachment of the 
twelve endorsements which previously have been adopted pursuant to Article 5.35 
for attachment to Texas Dwelling Policy Form TDP-1, also shall apply to the 
attachment of these endorsements to a PPP dwelling policy. 
4. Rule VII-D--Rating Rules. This rule requires that the premium for the PPP 
dwelling policy (Form TDP-1) is to be determined in the same manner and using 
the same premium charts as for a Texas Dwelling Policy Form TDP-1. The proposed 
rule specifies the rates and rating methods for those PPP endorsements requiring 
a reduction in or addition to premium when attached to a PPP dwelling policy 
(Form TDP-1) and proposes the following reductions or additions for these 
endorsements: 
(a) Accidental Discharge, Leakage, or Overflow of Water or Steam and Freezing, 
Endorsement Number (PPP) TDP-031 (additional premium): (Calculation of the 
additional premium to be charged for this endorsement requires input from 
insurers. This rate will be determined under a separate rulemaking procedure). 
(b) Collapse of Building, Breakage of Glass, and Falling Objects, Endorsement 
Number (PPP) TDP-032 (additional premium): An additional premium of $1.00, 
regardless of the limit of liability, is charged for the addition of these 
coverages. Deductible adjustment percentage and flex percentage apply to his 
coverage. This additional premium shall not be less than $1.00. 
(c) Theft, Endorsement Number (PPP) TDP-033 (additional premium): The additional 
premiums for adding theft coverage vary by territory and by amount of insurance, 
as fully detailed in a chart in the petition and rule. 
C. Farm and Ranch Section. Rule VII, Property Protection Program. 
1. Rule VII-A--General. This rule provides general instructions for the writing 
of the PPP farm and ranch policy, which insurers must offer through Texas Farm 
and Ranch Policy Form TFR-1, and for endorsement forms adopted solely for use 
under the PPP. The rule also requires that all other rules contained in the Farm 
and Ranch Section of the Manual which govern the writing of Form TFR-1, as well 
as optional additional coverages and endorsements to Form TFR-1 that have been 
adopted for use under the PPP and which are not in conflict with the proposed 
rules in subsection VII, shall apply to the writing of PPP farm and ranch policy 
and endorsement forms. The rule further provides that the flexibility 
percentages filed by individual companies which are applicable to the Texas Farm 
and Ranch Policy Form TFR-1 will apply to the PPP farm and ranch policy and 
endorsement forms. 
2. Rule VII-B--Eligibility. This rule: (i) provides that a PPP farm and ranch 
policy (Form TFR-1) may only be issued for property located in a Class 1 
underserved area (as initially designated by Commissioner's Order Number 96-1118 
(September 24, 1996) pursuant to Article 5.35-3, sec.1) and includes a chart 
listing the Class 1 areas by ZIP Code, city and county; (ii) states that 
windstorm, hurricane and hail coverage for property located in an area 
designated as a catastrophe area by the Commissioner may not be provided under 
the PPP, and requires that an endorsement excluding such coverage be attached to 
each PPP farm and ranch policy issued; and (iii) states that PPP farm and ranch 
coverage may only be provided by Farm and Ranch Policy Form TFR-1. 
3. Rule VII-C--Optional Endorsements. This rule lists the endorsements that may 
be attached to a PPP farm and ranch policy (Form TFR-1): (i) ten new PPP 
endorsements adopted by Commissioner's Order Number 95-1285 (December 8, 1995) 
pursuant to Article 5.35-3 and (ii) fourteen endorsements adopted by 
Commissioner's Order Number 95-1285 that had previously been adopted pursuant to 
Article 5.35 for attachment to Texas Farm and Ranch Policy Form TFR-1. The rule 
includes a general description of each of the ten new endorsements adopted 
pursuant to Article 5.35-3. This description specifies whether the attachment of 
the endorsement requires a reduction in premium, an additional premium, or no 
additional premium. The proposed rule provides that the rates and rating rules, 
as set forth in the Farm and Ranch Section of the Manual for the attachment of 
the fourteen endorsements which previously have been adopted pursuant to Article 
5.35 for attachment to Texas Farm and Ranch Policy Form TFR-1, also shall apply 
to the attachment of these endorsements to a PPP farm and ranch policy. 
4. Rule VII-D--Rating Rules. This rule requires that the premium for the PPP 
farm and ranch policy (Form TFR-1) is to be determined in the same manner and 
using the same premium charts as for a Texas Farm and Ranch Policy Form TFR-1. 
The proposed rule specifies the rates and rating methods for those PPP 
endorsements requiring a reduction in or addition to premium when attached to a 
PPP farm and ranch policy (Form TFR-1) and proposes the following reductions and 
additions for these endorsements: 
(a) Accidental Discharge, Leakage, or Overflow of Water or Steam and Freezing, 
Endorsement Number (PPP) TFR-081 (additional premium): (Calculation of the 
additional premium to be charged for this endorsement requires input from 
insurers. This rate will be determined under a separate rulemaking procedure).
(b) Collapse of Building, Breakage of Glass, and Falling Objects, Endorsement 
Number (PPP) TFR-082 (additional premium): An additional premium of $1.00, 
regardless of the limit of liability, is charged for the addition of these 
coverages. Deductible adjustment percentage and flex percentage apply to this 
coverage. This additional premium shall not be less than $1.00. 
(c) Theft, Endorsement Number (PPP) TFR-083 (additional premium): The additional 
premiums for adding theft coverage vary by territory and by amount of insurance, 
as fully detailed in a chart in the petition and rule. 
D. Farm and Ranch Owners Section. Rule VII, Property Protection Program.
1. Rule VII-A--General. This rule provides general instructions for the writing 
of the PPP farm and ranch owners policy, which insurers must offer through Farm 
and Ranch Owners Policy Form FRO-A, and for endorsement forms adopted solely for 
use under the PPP. The rule also requires that all other rules contained in the 
Farm and Ranch Owners Section of the Manual which govern the writing of Form 
FRO-A, as well as optional additional coverages and endorsements to Form FRO-A 
that have been adopted for use under the PPP and which are not in conflict with 
the proposed rules in subsection VII, shall apply to the writing of PPP farm and 
ranch owners policy and endorsement forms. The rule further provides that the 
flexibility percentages filed by individual companies for Texas Farm and Ranch 
Owners Policy Form FRO-A will apply to the PPP homeowners policy and endorsement 
forms. 
2. Rule VII-B--Eligibility. This rule: (i) provides that a PPP farm and ranch 
owners policy (Form FRO-A) may only be issued for property located in a Class 1 
underserved area (as initially designated by Commissioner's Order Number 96-1118 
(September 24, 1996) pursuant to Article 5.35-3, sec.1) and includes a chart 
listing the Class 1 areas by ZIP Code, city and county;
(ii) states that windstorm, hurricane and hail coverage for property located in 
an area designated as a catastrophe area by the Commissioner may not be provided 
under the PPP, and requires that an endorsement excluding such coverage be 
attached to each PPP farm and ranch owners policy issued; and
(iii) states that PPP farm and ranch owners coverage may only be provided by 
Farm and Ranch Owners Policy Form FRO-A. 
3. Rule VII-C--Optional Endorsements. This rule lists the endorsements that may 
be attached to a PPP farm and ranch owners policy (Form FRO-A):
(i) ten new PPP endorsements adopted by Commissioner's Order Number 95-1285 
(December 8, 1995) pursuant to Article 5.35-3 and (ii) twenty three endorsements 
adopted by Commissioner's Order Number 95-1285 that had previously been adopted 
pursuant to Article 5.35 for attachment to Texas Farm and Ranch Owners Policy 
Form FRO-A. The rule includes a general description of each of the ten new 
endorsements adopted pursuant to Article 5.35-3. This description specifies 
whether the attachment of the endorsement requires a reduction in premium, an 
additional premium, or no additional premium. The proposed rule provides that 
the rates and rating rules, as set forth in the Farm and Ranch Owners Section of 
the Manual for the attachment of the twenty-three endorsements which previously 
have been adopted pursuant to Article 5.35 for attachment to Texas Farm and 
Ranch Owners Policy Form FRO-A, also shall apply to the attachment of these 
endorsements to a PPP farm and ranch owners policy. 
4. Rule VII-D--Rating Rules. This rule requires that the basic premium for the 
PPP farm and ranch owners policy (Form FRO-A) is to be determined in the same 
manner and using the same premium charts as for a Texas Farm and Ranch Owners 
Policy Form FRO-A. The proposed rule specifies the rates and rating methods for 
those PPP endorsements requiring a reduction in or addition to premium when 
attached to a PPP farm and ranch owners policy (Form FRO-A) and proposes the 
following rates for each of these endorsements: 
(a) Exclusion of Coverage, Endorsement Number (PPP) FRO-800 (reduction in 
premium for exclusion of coverage for the perils of (i) vandalism and malicious 
mischief and/or (ii) theft): Premium reductions for exclusions of vandalism and 
malicious mischief coverage vary by territory, from $12 to $1.00, as fully 
detailed in the petition and rule. Premium reductions for exclusions of theft 
coverage vary by territory and by amount of insurance, as fully detailed in a 
chart in the petition and rule. 
(b) Accidental Discharge, Leakage, or Overflow of Water or Steam and Freezing, 
Endorsement Number (PPP) FRO-803 (additional premium): (Calculation of the 
additional premium to be charged for this endorsement requires input from 
insurers. This rate will be determined under a separate rulemaking procedure).
(c) Collapse of Building, Breakage of Glass, and Falling Objects, Endorsement 
Number (PPP) FRO-804 (additional premium): An additional premium of $1.00, 
regardless of the limit of liability, is charged for the addition of these 
perils. 
The PPP is authorized by Article 5.35-3 of the Insurance Code, which was enacted 
by the 74th Legislature in HB 1367 (Acts 1995, 74th Legislative, chapter 415, 
sec.3, page 3007, effective August 28, 1995). Article 5.35-3 provides that the 
Commissioner by rule may determine and designate areas as underserved areas for 
residential property insurance. In regards to this determination of underserved 
areas, Article 5.35-3, sec.1(a) directs the Commissioner to consider whether 
residential property insurance is not reasonably available to a substantial 
number of owners of insurable property in the underserved area, and also to 
consider any other factors determined to be relevant by the Commissioner. 
Subsection 1(a) of the article defines residential property insurance for 
purposes of the PPP as insurance 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. 
Subsection 1(b) of the article prohibits the PPP from including windstorm and 
hail insurance coverage for a risk eligible for that coverage under Article 
21.49 of the Insurance Code. Under Article 5.35-3, sec.2, all insurers 
authorized to write property or casualty insurance in this state and writing 
property or casualty insurance in this state, including those insurers licensed 
under the Insurance Code, Chapters 18 (Lloyd's plans) and 19 (reciprocal 
exchanges), are authorized to write insurance on the forms adopted under Article 
5.35-3. Article 5.35-3, sec.3 authorizes the Commissioner to adopt policy forms 
for residential property insurance specifically for use in the designated 
underserved areas. This authority necessarily also includes the adoption of the 
manual rules governing the writing of policy forms and endorsements. Section 3 
further provides that the policy forms adopted pursuant to Article 5.35-3 shall 
include a basic policy covering fire and allied lines perils, with endorsements 
providing that the adopted policy forms may be used by all insurers writing 
insurance in underserved areas. Article 5.35-3, sec.4 states that the rates for 
residential property insurance subject to Article 5.35-3 shall be determined in 
accordance with the provisions of the Insurance Code applicable to each insurer. 
Article 5.35-3, sec.5 requires all insurers that must participate in the PPP in 
accordance with section 2 of the article to make available to their agents, who 
in turn must offer to insureds in underserved areas, the full range of coverages 
promulgated under Article 5.35-3, subject to applicable rates and underwriting 
guidelines of each such insurer. Article 5.35, sec.sec.6-7 offer tax and other 
incentives to encourage insurers to participate actively in the PPP. 
The Commissioner has jurisdiction of this matter pursuant to the Insurance Code, 
Articles 5.35-3, 5.96 and 5.98. 
Copies of the full text of the staff petition and the proposed manual rules, 
rating methods, rates and premiums are available for review in the Office of the 
Chief Clerk of the Texas Department of Insurance, 333 Guadalupe Street, Austin, 
Texas, 78714-9104. For further information or to request copies of the petition 
and proposed amendments, please contact Angie Arizpe at (512) 463-6326 (refer to 
Reference Number P-1096-49-I). 
Comments on the proposed changes must be submitted in writing within 30 days 
after publication of the proposal in the Texas Register to the Office of the 
Chief Clerk, P.O. Box 149104, MC113-2A, Austin, Texas 78714-9104. An additional 
copy of the comment should be submitted to Lyndon Anderson, Associate 
Commissioner for Property and Casualty Division, P.O. Box 149104, MC103-1A, 
Austin, Texas 78714-9104. 
This notification is made pursuant to the Insurance Code, Article 5.96, which 
exempts action taken under this article from the requirements of the 
Administrative Procedure Act (Government Code, Title 10, chapter 2001). 
This agency hereby certifies that the proposed rules have been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on October 30, 1996.
TRD-9615770
Caroline Scott
General Counsel and Chief Clerk
Texas Department of Insurance
Filed: October 30, 1996

PROPOSED
The Commissioner of Insurance will hold a public hearing under Docket Number 
2267 on December 9, 1996 at 9:00 a. m. in Room 102 of the Texas Department of 
Insurance Building, 333 Guadalupe Street in Austin, Texas, to consider a 
petition by the staff of the Texas Department of Insurance proposing the 
adoption of amendments to the Homeowners, Dwelling, Farm and Ranch Owners, and 
Farm and Ranch sections of the Texas Personal Lines Manual (Manual) to establish 
a premium credit for approved fire protection sprinkler systems for residential 
property insurance policies and the adoption of the "Inspector's Fire Protection 
Sprinkler System Report" form and the "Residential Sprinkler System Premium 
Reduction Certificate" form to be used to demonstrate that the applicant is 
entitled to the fire protection sprinkler system premium reduction. 
The petition requests consideration of the addition of a new rule to each 
section of the Texas Personal Lines Manual: 
(1) In the Homeowners section, staff proposes adding new Rule VI-L, "Reduction 
in Homeowners Premium -- Automatic Sprinkler System" and redesignating existing 
Rule VI-L, "Rate and Premium Calculation Rule" as Rule VI-M, "Rate and Premium 
Calculation Rule." 
(2) In the Dwelling section, staff proposes adding new subsection 5, "Reduction 
in Dwelling Premium -- Automatic Sprinkler System" to Rule VI-C, Additional 
Premium Modifications. 
(3) In the Farm and Ranch Owners section, staff proposes adding new Rule VI-L, 
"Reduction in Farm and Ranch Owners Premium -- Automatic Sprinkler System." 
(4) In the Farm and Ranch section, staff proposes adding new subsection 4, 
"Reduction in Farm and Ranch Dwelling Premium -- Automatic Sprinkler System" to 
Rule VI-D, Additional Premium Modifications. 
These rules provide a mandatory insurance premium reduction for policyholders 
who have installed a fire protection sprinkler system in the policyholder's 
residence. The proposed rules also establish the amount of the premium reduction 
and state that the premium reduction applies to the total homeowners premium, 
the dwelling fire and lightning premium, the farm and ranch owners dwelling 
premium, and the farm and ranch fire and lightning premium respectively. The 
staff proposal includes amending the current rules governing the rating of 
sprinklered risks as follows: 
(1) In the Homeowners section, Manual Rule VI-F would be amended to add a note 
that specifies that risks with sprinkler systems complying with NFPA 13D will be 
referred to new Manual Rule VI-L for the applicable credit. 
(2) In the Dwelling section, Manual Rule VI-B would be amended to add a note 
that specifies that risks with sprinkler systems complying with NFPA 13D will be 
referred to new Manual Rule VI-C.5. for the applicable credit.
(3) In the Farm and Ranch Owners section, Manual Rule VI-F would be amended to 
add a note that specifies that risks with sprinkler systems complying with NFPA 
13D will be referred to new Manual Rule VI-L for the applicable credit.  
(4) In the Farm and Ranch section, Manual Rule VI-B would be amended to add a 
note that specifies that risks with sprinkler systems complying with NFPA 13D 
will be referred to new Manual Rule VI-D. 4. for the applicable credit. 
These rules provide that risks having a sprinkler system installed in accordance 
with National Fire Protection Association Standard 13 should be submitted to the 
Texas Department of Insurance for applicable premium charges. The staff proposal 
adds a reference for sprinklered risks complying with NFPA 13D that states the 
residential fire protection sprinkler system premium reduction rules apply. 
Staff proposes the consideration and adoption of an "Inspector's Fire Protection 
Sprinkler System Report" form to be used by inspectors of residential sprinkler 
systems. The form will be used to certify that the residential sprinkler system 
meets the standards established by the Texas Commission on Fire Protection and 
qualifies for a premium reduction under Article 5.33B of the Texas Insurance 
Code. The proposed "Inspector's Fire Protection Sprinkler System Report" form 
must be completed by a licensed Responsible Managing Employee (RME) dwelling 
inspector or a sprinkler contractor registered by the Texas Commission on Fire 
Protection and it must be provided to the Texas Department of Insurance. Staff 
proposes the adoption of a "Residential Sprinkler System Premium Reduction 
Certificate." The Certificate states that the applicant is entitled to a premium 
reduction on the applicant's residential property insurance. The Certificate 
will be issued by the Texas Department of Insurance upon receipt of an 
"Inspector's Fire Protection Sprinkler System Report" form that certifies that 
the residential fire protection sprinkler system meets applicable standards and 
qualifies the applicant's property for a premium reduction. 
Staff proposes the adoption of premium reduction credits of 8.0% and 12% for 
policyholders who obtain a Residential Sprinkler System Premium Reduction 
Certificate. The credit was determined after reviewing data supplied by the 
Insurance Services Office (ISO) regarding Automatic Sprinkler System Discounts 
in a dwelling. The ISO provides for a maximum 8.0% credit for automatic 
sprinklers located in all areas except the attic, bathroom, closet and attached 
structure areas that are protected by a fire detector. This criteria is similar 
to the criteria contained in the Homeowners Section of the Personal Lines 
Manual. Staff believes that the NFPA13D standards adopted by the Texas 
Commission on Fire Protection are comparable in many respects to the 8.0% 
discount utilized by ISO and authorized in the Personal Lines Manual. Based on 
this analysis staff proposes an 8.0% premium reduction for homeowners, and Farm 
and Ranch Owners insurance. The 8.0% premium reduction applies to the total 
homeowners premium, and the total Farm and Ranch Owners Premium. Staff also 
determined that for Dwelling and Farm and Ranch policies the fire rate comprises 
a greater portion of the premium. For this reason staff proposes a 12% premium 
reduction for Dwelling and Farm and Ranch policies. The 12% premium reduction 
applies to the actual fire premium for Dwelling and Farm and Ranch policies. 
Due to the lack of Texas data, the premium reductions proposed by staff are 
judgmental. Staff will monitor the Texas experience developed under this program 
and propose any modifications to the premium reduction amounts deemed necessary. 
Insurance Code Article 5.33B, entitled Reduction in Homeowners Insurance 
Premiums for Approved Sprinkler Systems, was enacted by the 74th Texas 
Legislature and became effective September 1, 1995. Section 2 of Article 5.33B, 
states, "A policyholder of a one-family or two-family dwelling is entitled to a 
premium reduction for homeowners insurance coverage if the policyholder has 
installed on the covered property a fire protection sprinkler system that is 
approved under this article by an inspector." Article 5.33B requires that an 
inspector must inspect the property and file with the Texas Department of 
Insurance a written report that states whether the sprinkler system meets 
applicable standards. Article 5.33B defines applicable standards as the 
standards for a fire protection sprinkler system that are adopted by rule by the 
Texas Commission on Fire Protection. 
Article 5.33B provides that if the inspector's report indicates that the 
property qualifies for a premium reduction the Texas Department shall issue a 
premium reduction certificate entitling the applicant to a premium reduction. 
Article 5.33B also requires the Commissioner of Insurance to establish, by rule, 
the amount of the premium reduction applicable to a homeowners insurance policy. 
Effective August 26, 1996, the Texas Commission on Fire Protection adopted 
amendments to several rules and added a new rule to Title 37 Texas 
Administrative Code Chapter 541 concerning the regulation of the business of 
inspecting, planning, selling, servicing, installing, and maintaining fire 
protection sprinkler systems. The new and revised rules establish the minimum 
standards for a fire protection sprinkler system in one and two-family dwellings 
and authorize certain licensed inspectors--a dwelling type responsible managing 
employee--to conduct a premium reduction inspection of a fire protection 
sprinkler system in a one or two-family dwelling. 
Staff's proposed rules, forms and rates are necessary to implement the 
provisions of Article 5.33B. The proposed rules establish the amount of the 
discount, incorporate the fire protection sprinkler system standards adopted by 
the Commissioner, and require the presentation of a valid certificate form. The 
proposal also prescribes the "Inspector's Fire Protection Sprinkler System 
Report" form and "Residential Sprinkler System Premium Reduction Certificate" 
form that will be used with this program. 
The Commissioner has jurisdiction of this matter pursuant to the Insurance Code, 
Articles 5.33B, 5.96, and 5.98. 
Copies of the full text of the staff petition and the proposed endorsements and 
Manual rules are available for review in the Office of the Chief Clerk of the 
Texas Department of Insurance, 333 Guadalupe Street, Austin, Texas, 78714-9104. 
For further information or to request copies of the petition and proposed 
amendments, please contact Angie Arizpe at (512) 463-6326. (Refer to Reference 
Number P-1096-50-I) 
Comments on the proposed changes must be submitted in writing within 30 days 
after publication of the proposal in the Texas Register to the Office of the 
Chief Clerk, P. O. Box 149104, MC 113-2A, Austin, Texas 78714-9104. An 
additional copy of the comment should be submitted to David Durden, Deputy 
Commissioner for Property and Casualty Lines, P. O. Box 149104, MC 104-5A, 
Austin, Texas 78714-9104. 
This notification is made pursuant to the Insurance Code, Article 5.96, which 
exempts action taken under this article from the requirements of the 
Administrative Procedure Act (Government Code, Title 10, Chapter 2001). 
This agency hereby certifies that the proposed rules have been reviewed by legal 
counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on October 30, 1996.
TRD-9615771
Caroline Scott
General Counsel and Chief Clerk
Texas Department of Insurance
Filed: October 30, 1996