SECTION 5.4126. Determination of the Association Surcharge Percentage

(a) If, at any time the association, after consultation with TPFA, determines that net premium and other revenue are not sufficient to pay class 1, class 2, or class 3 public securities payable under Insurance Code §§2210.612, 2210.613, and 2210.6131, respectively, the association must promptly submit a request to the commissioner to approve an association surcharge. While the public securities are outstanding, at least quarterly, the association must determine if its net premium and other revenue is sufficient to pay for securities payable under Insurance Code §§2210.612, 2210.613, and 2210.6131.

(b) A request described by subsection (a) of this section must include the following information for each class of public securities for which an association surcharge is required:

(1) the proposed association surcharge percentage;

(2) the amount the association has determined, after consultation with TPFA, is the debt service and all related expenses on the public securities for the applicable period;

(3) the amount that the association has determined is the debt service not already covered by available funds and all related expenses on the public securities for the applicable period;

(4) for policies that comply with the requirements of §5.4912 of Division 10 of this subchapter (relating to Filing and Issuance of Policy Forms Relating to Premium Surcharges under Insurance Code §§2210.612, 2210.613, and 2210.6131), the association's best estimate of its anticipated gross premium for policies in effect on the date described by paragraph (8) of this subsection;

(5) for policies that do not yet comply with the requirements of §5.4912 of Division 10 of this subchapter, the association's best estimate of its anticipated gross premium for the period described by paragraphs (9) and (10) of this subsection;

(6) all relevant data the association relied upon when determining the amounts in paragraphs (2) - (5) of this subsection;

(7) an explanation of the methodology, including all material assumptions, the association used to determine the amounts in paragraphs (2) - (5) of this subsection;

(8) the date, which must be no more than 90 days after the date the request is received by the commissioner, on which the association surcharge applies to policies that are in force and compliant with §5.4912 of Division 10 of this subchapter;

(9) the date on which the association surcharge begins to apply to policies not compliant with §5.4912 of Division 10 of this subchapter, which must be the same date as the date in paragraph (8) of this subsection; and

(10) the date on which the association surcharge ceases to apply to policies not compliant with §5.4912 of Division 10 of this subchapter, which must be the day after the date the last noncompliant policy expires.

(c) The commissioner will, within 10 business days of receipt of the request in subsection (b), notify the association and TPFA of the commissioner's determination on the sufficiency of the association surcharge percentage requested. The association must implement the surcharge percentage the commissioner determines is sufficient.

(d) If the commissioner independently determines that net premium and other revenue are not sufficient to pay for securities payable under Insurance Code §§2210.612, 2210.613, and 2210.6131, the commissioner may order the association to assess an association surcharge. The order must specify the date on which the surcharge applies. The surcharge may not apply earlier than the 20th day following the date of the order.

Source Note: The provisions of this §5.4126 adopted to be effective March 9, 2016, 41 TexReg 1697