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You are here: Home . rules . 2003 . 0203-059
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SUBCHAPTER D. FIRE AND ALLIED LINES INSURANCE

Division 8. UNDERSERVED AREAS FOR RESIDENTIAL PROPERTY INSURANCE

28 TAC §5.3701

The Texas Department of Insurance proposes new §5.3701, concerning the designation of the areas determined by the Commissioner of Insurance to be underserved for purposes of residential property insurance pursuant to the Texas Insurance Code Article 21.49A (FAIR Plan (Fair Access to Insurance Requirements) Act). The new section is necessary to designate all 254 counties of the State of Texas as the underserved areas for the FAIR Plan because it has been determined that residential property insurance is not reasonably available to a substantial number of owners of insurable property in these areas.

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. According to statistics obtained from the Surplus Lines Stamping Office of Texas, from December 31, 2001 to December 31, 2002, there was a 105.3% 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. In addition, 971 homeowners insurance policies have been issued through the FAIR Plan from December 31, 2002 to January 31, 2003.

Considering all of these facts, it is clear 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. This section is proposed to ensure that residential property insurance coverage is available to Texas residents. The proposed section designates all 254 counties of the State of Texas as the underserved areas for the FAIR Plan because it has been determined that residential property insurance is not reasonably available to a substantial number of owners of insurable property in these areas.

C.H. Mah, Senior Associate Commissioner, Property & Casualty Program, has determined that for each year of the first five years the proposed section will be in effect, there will be no fiscal impact to state and local governments as a result of the enforcement or administration of the rule. There will be no measurable effect on local employment or the local economy as a result of the proposal.

Mr. Mah also has determined that for each year of the first five years the proposed section is in effect the public benefit anticipated as a result of enforcing or administering the proposed section will be increased availability of residential property insurance in the state. There is no anticipated adverse economic effect on large or small insurers who are required to comply with the proposed new section since the section is a designation of the state as an underserved area and does not have any requirements which must be met.

To be considered, written comments on the proposal must be submitted no later than 5:00 p.m. on March 14, 2003 to Gene C. Jarmon, General Counsel and Chief Clerk, Mail Code 113-2A, Texas Department of Insurance, P. O. Box 149104, Austin, Texas 78714-9104. An additional copy of the comment must be simultaneously submitted to C.H. Mah, Senior Associate Commissioner, Property & Casualty Program, Texas Department of Insurance, Mail Code 105-5G, P.O. Box 149104, Austin, Texas 78714-9104. A request for a public hearing should be submitted separately to the Office of the Chief Clerk.

The new section is proposed pursuant to the Insurance Code Articles 21.49A, 5.35-3 and §36.001. Article 21.49A provides that underserved areas for the FAIR Plan shall be determined and designated by the Commissioner by rule using the standards specified in Article 5.35-3 §1. Article 5.35-3 §1 provides that in determining which areas will be designated as underserved, the Commissioner shall consider whether residential property insurance is not reasonably available to a substantial number of owners of insurable property in the underserved area and any other relevant factor as determined by the Commissioner. Insurance Code §36.001 authorizes the Commissioner of Insurance to adopt rules for the conduct and execution of the duties and functions of the Texas Department of Insurance only as authorized by statute.

The following article is affected by this proposal: Article 21.49A

§5.3701. Designation of Underserved Areas for Residential Property Insurance for Purposes of the Insurance Code Article 21.49A. The Commissioner designates all 254 counties of the State of Texas as the underserved areas for the FAIR Plan because it has been determined that residential property insurance is not reasonably available to a substantial number of owners of insurable property in these areas.



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