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SUBCHAPTER E. TEXAS WINDSTORM INSURANCE ASSOCIATION Division 1. PLAN OF OPERATION 28 TAC §5.4001 Division 6. MANUAL Rules for the Texas Windstorm Insurance Association 28 TAC §5.4501

The Texas Department of Insurance proposes amendments to §5.4001, the plan of operation of the Texas Windstorm Insurance Association (Association or TWIA), and §5.4501 concerning the adoption by reference of the rule manual governing the writing of windstorm and hail insurance coverage by the Association. The purpose of the Association is to provide windstorm and hail insurance coverage to coastal residents who are unable to obtain such coverage in the voluntary market.

Subsection (d)(1)(E)(ii) of §5.4001 (the TWIA Plan of Operation) outlines the procedures regarding the binding of new or increased coverage including an exception when a hurricane is in the Gulf of Mexico or within the boundaries of 80 degrees west longitude and 20 degrees north latitude (80/20 zone). The language in subsection (d)(1)(E)(ii) specifies that, if a hurricane is not imminent, the date an application for new or increased coverage will be accepted by TWIA includes both the date the application is received by the Association and the date that the application is mailed if sent by registered, certified, or United States Postal Service Express Mail, or if sent by regular mail that is hand canceled by the United States Postal Service. However, in this subsection there is an exception to this general rule, regarding the binding of new or increased coverage when a hurricane is imminent.

At its September 2001 meeting, the TWIA Board of Directors met and requested that its Underwriting Committee review and recommend changes to the existing exception, which was not date or time specific regarding when TWIA would no longer accept applications for new or increased coverage when a hurricane is imminent. At the December 2001 TWIA Board meeting, the Underwriting Committee presented its recommendations to the Board, which voted to petition the Department to amend the exception to more clearly define when new or increased coverage will no longer be accepted due to an imminent storm.

To remedy the lack of date and time specificity of the existing exception, TWIA´s petition proposes new language which specifies that no new or increased coverage applications shall be accepted by TWIA on the day (beginning at 12:01 a.m.) when a hurricane designated by the United States Weather Bureau is in the Gulf of Mexico or within the boundaries of 80 degrees west longitude and 20 degrees north latitude, until the General Manager of TWIA determines that the storm no longer threatens property in the designated catastrophe area. The proposed exception does not apply to an application delivered in person to the TWIA´s Austin office during its normal business hours prior to a hurricane being in the Gulf of Mexico or within the boundaries of 80 degrees west longitude and 20 degrees north latitude or to an application that is mailed by registered mail, certified mail, United States Postal Service Express Mail, or regular mail that has been hand cancelled by the United States Postal Service prior to the first day when a windstorm that has been designated a hurricane by the United States Weather Bureau is in the Gulf of Mexico or the 80/20 zone. Such hand delivered or mailed applications become effective on the date they are delivered in person or the date they are mailed or a later date if stipulated on the application.

The amendment to §5.4501 proposes to adopt by reference a rule revision to the manual that is necessary to conform General Rule I, (New or Increased Coverage and Renewal Applications) to the proposed changes to the plan of operation. General Rule I contains the same language as the plan of operation concerning the exception to binding new or increased coverage when a storm is imminent. Any changes to the language in the plan of operation regarding the exception to binding coverage when a storm is imminent will also be required to be reflected in General Rule I.

A copy of the petition along with the proposed amendment to the manual rule is available for review in the Office of the Chief Clerk, Texas Department of Insurance, 333 Guadalupe Street, Austin, Texas, 78714-9104. To request a copy of the petition with the attachments, please contact Angela Arizipe at 512/322-4147. The department will consider the adoption of amendments to §5.4001 and §5.4501 in a public hearing under Docket Number 2526, scheduled for 9:30 a.m. on September 17, 2002, in Room 100 of the William P. Hobby, Jr. State Office Building, 333 Guadalupe Street, Austin, Texas.

Marilyn Hamilton, Associate Commissioner, Property and Casualty Program, has determined that for each year of the first five years the proposed amendments are in effect, there will be no fiscal implications for state government or local government as a result of enforcing or administering the proposed amendments. Ms. Hamilton has also determined that for each year of the first five years the proposed amendments will be in effect, there will be no adverse effect on local employment or the local economy.

Ms. Hamilton has further determined that for each year of the first five years the proposed amendments are in effect, the public benefit anticipated as a result of enforcing the sections will be to remove any ambiguity that may exist with the current language and to more clearly define the time and date when the acceptance of new or increased coverage will be cut off due to an imminent storm. The proposed amendments clarify the current procedures TWIA follows regarding acceptance of new or increased coverage when a storm is imminent, and will provide clearer notice to policyholders and new applicants of these procedures and requirements for obtaining new or increased coverage when a storm is imminent. There is no anticipated adverse economic effect on large, small, or micro-businesses that are required to comply with the proposed amendments because the amendments do not add any new requirements to the plan of operation.

To be considered, written comments on the proposed amendments must be submitted no later than 5:00 p.m. on September 9, 2002 to Lynda H. Nesenholtz, General Counsel and Chief Clerk, MC 113-2A, Texas Department of Insurance, P. O. Box 149104, Austin, Texas, 78714-9104. An additional copy of the comment should be simultaneously submitted to Marilyn Hamilton, Associate Commissioner, Property and Casualty Program, MC 104-PC, Texas Department of Insurance, P. O. Box 149104, Austin, Texas, 78714-9104.

The amendments are proposed pursuant to the Insurance Code Article 21.49 and §36.001. Article 21.49 §5(c) of the Insurance Code provides that the Commissioner of Insurance by rule shall adopt the TWIA plan of operation with the advice of the TWIA board of directors. Section 5(f) of Article 21.49 provides that any interested person may petition the Commissioner to modify the plan of operation in accordance with the Administrative Procedure Act. Article 21.49 §8 authorizes the Commissioner of Insurance to approve, modify, or disapprove every manual of classification, rules, rates, rating plans, and every modification of any of the foregoing used by the Association. Insurance Code §36.001 authorizes the Commissioner of Insurance to adopt rules which must be for general and uniform application, for the conduct and execution of the duties and functions of the Texas Department of Insurance only as authorized by statute.

The following statute is affected by this proposal: Insurance Code Article 21.49

§5.4001. Plan of Operation.

(a)-(c) (No change.)

(d) Catastrophe Insurance.

(1) (No change.)

(2) Applicant, acceptance, and rejection.

(A)-(D) (No change.)

(E) Receipt of the application.

(i) (No change.)

(ii) New or increased coverage will be effective on the date received by the association or effective on the date the application is mailed if sent by registered or certified mail, or by United States Postal Service Express Mail, or if sent by regular mail that is hand cancelled by the United States Postal Service, or if sent by such other similar mailing procedure as approved by the board of directors, prior to the time specified in this clause as an exception, unless the application for new or increased coverage stipulates a later date. Renewal policies will be effective to provide continuous coverage if the request for a renewal is received on or before the expiration of the existing policy. Exception: no new or increased coverage applications will [ shall] be accepted on the day (beginning at 12:01 A.M.) or after [ when] a windstorm designated as a hurricane by the United States Weather Bureau is in the Gulf of Mexico or within the boundaries of 80 degrees west longitude and 20 degrees north latitude , until the General Manager determines that the storm no longer threatens property within the designated catastrophe area of the Texas Windstorm Insurance Association. This exception does not apply to any new or increased coverage application that meets underwriting criteria that is submitted as follows: delivered in person to the Texas Windstorm Insurance Association's Austin office during its normal business hours prior to a windstorm designated as a hurricane by the United States Weather Bureau being in the Gulf of Mexico or within the boundaries of 80 degrees west longitude and 20 degrees north latitude; or mailed prior to the first day that a windstorm designated as a hurricane by the United States Weather Bureau is in the Gulf of Mexico or within the boundaries of 80 degrees west longitude and 20 degrees north latitude by registered or certified mail or United States Postal Service Express Mail or regular mail that is hand-canceled by the United S tates Postal Service or such other mailing procedure as approved by the Board of Directors. Such applications will be accepted and become effective on the date delivered in person or mailed or a later date if stipulated on the applications. This exception also does not apply to any renewal policy affording windstorm coverage if the expiring policy was written by the Texas Windstorm [ Catastrophe Property] Insurance Association and if the application for renewal was received by the Texas Windstorm [ Catastrophe Property] Insurance Association on or before the expiration of the existing Texas Windstorm [ Catastrophe Property] Insurance Association policy or if mailed by registered or certified mail or United States Postal Service Express Mail or by regular mail that is hand-cancelled by the United States Postal Service, or if sent by such other similar mailing procedure as approved by the board of directors, prior to the expiration of the existing Texas Windstorm [ Catastrophe Property] Insurance Association policy.

(3)-(4) (No change.)

(e) (No change.)

§5.4501. Rules for the Texas Windstorm Insurance Association. The Texas Department of Insurance adopts by reference a rules manual for the Texas Windstorm Insurance Association as amended effective, June 15, 1999. The Texas Department of Insurance adopts by reference amendments effective May 1, 2001, and October 1, 2002, to the rules manual. Copies of the rules manual may be obtained by contacting the Automobile and Homeowners Division, Mail Code 104-5A, Texas Department of Insurance, 333 Guadalupe Street, P.O. Box 149104, Austin, Texas 78714-9104.



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