New TWIA Rules Adopted
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The Commissioner of Insurance has adopted rules, effective immediately, implementing provisions of HB 4409 (81st Texas Legislature, 2009, Regular Session) concerning the plan of operation for the Texas Windstorm Insurance Association (TWIA). These rules concern declinations of coverage, flood insurance, minimum retained premium, continuation of coverage for persons under the pre-existing certificate of compliance approval program, a certificate of compliance transition program, and the definition of the terms alter and alteration.
Because we're in the midst of hurricane season, these rules are being adopted on an emergency basis, and will be replaced with permanent rules within 180 days.
One Declination Required
To be eligible for coverage through TWIA, the insured must have one declination from a licensed insurer (authorized). The insurer must be writing new or renewal policies that include windstorm coverage somewhere in the Tier 1 coastal counties. The declination can be either a refusal to offer or a nonrenewal of windstorm coverage, or a refusal to offer substantially similar coverage to the coverage being sought by the applicant and provided by TWIA (such as higher required deductibles or coverage that does not pay for replacement of damaged property, known as Actual Cash Value coverage). The agent may assist the customer in obtaining the declination.
Flood Insurance
To be eligible for coverage from TWIA, a structure must have flood insurance if the structure is constructed, remodeled, enlarged, or altered on or after 9-1-2009 and the structure is located in National Flood Insurance Program (NFIP) Zones V, VE or V1-V30 -- also known as "velocity" zones that are subject to storm induced waves. Constructed, remodeled, enlarged, or altered under this section refers to those activities that would require a certificate of compliance.
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This requirement does not apply to repairs.
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Coverage under the flood policy must be 90% of TWIA coverage, or if replacement coverage is not available, then 90% of actual cash value (ACV), unless the coverage under the flood policy is at the maximum amount offered by NFIP. (NFIP offers only ACV on non-primary dwellings.)
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The waiting period under the flood policy does not impact eligibility for the TWIA policy.
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Personal property items that are not part of the structure located on or above the third floor of the structure are not required to be covered by flood insurance.
Minimum Retained Premium
This rule applies only to policies issued or renewed on or after November 1, 2009, and that are then canceled within 180 days of the effective date of the policy. The minimum premium for a TWIA-covered structure is the greater of the premium amount for 180 days or $100. ($100 is the current minimum premium.)
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For statutory exceptions, only the $100 minimum retained premium is required.
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To limit financial burden on premium finance customers, for a TWIA policy issued on or after November 1, 2009, the premium finance company will receive a pro rata refund above the $100 minimum for cancellations that occur within 180 days of the effective date of the policy. The customer still owes TWIA the unpaid balance of the 180 days, and must pay that amount to be eligible for future TWIA coverage.
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If the customer that canceled the policy within 180 days is subsequently insured by TWIA, finances the premium and cancels the subsequent policy within 180 days the premium finance company will be refunded unearned premium in excess of 180 days.
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No coverage is provided beyond the effective date of the cancellation.
Certificate of Compliance Approval Program
The new rules address the grandfather provision in Insurance Code 2210.251(f) regarding those persons who are insured by TWIA as of 9/1/2009 under the approval program.
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Persons who have been insured by TWIA under the approval program, and experience a lapse in coverage of less than 30 days, are still considered to be eligible under the approval program if the person cures the lapse within the 30 day period.
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A person who experiences a lapse in coverage of 30 days or more after September 1, 2009 cannot continue coverage under the approval program and must meet inspections requirements.
Certificate of Compliance Transition Program
The new rules create a transition program for those persons not covered by the original approval program.
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Eligibility requirements are similar to those under the Certificate of Compliance Approval Program.
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Program expires August 31, 2011.
Definition of Alter and Alteration
These terms are defined using the definition currently on TDI’s inspection requirements website. This definition will not change any current inspection requirements.
For more information contact:
Last updated: 01/31/2012
