SECTION 5.4127. Contingent Sources of Payment for Class 2 and Class 3 Public Securities

(a) To obtain approval for the issuance of class 2 or class 3 public securities paid from contingent surcharges, the association must first submit a written request to the commissioner.

(b) In its request to the commissioner under subsection (a) of this section, the association must include:

(1) a determination from TPFA that TPFA is unable to issue class 2 or class 3 public securities paid as provided by Insurance Code §2210.613 or §2210.6131, as applicable; or

(2) the following information:

(A) the association's estimated net premium and other revenues;

(B) the association's best estimate of the terms and conditions necessary to issue marketable class 2 or class 3 public securities payable under Insurance Code §2210.613 or §2210.6131, as applicable, including:

(i) the estimated annual payments for principal and interest;

(ii) the estimated contractual coverage amount;

(iii) estimated reserve requirements;

(iv) the estimated amount of any other required payments for debt service;

(v) the estimated public security administrative expenses; and

(vi) any other conditions likely necessary to issue marketable public securities payable under Insurance Code §2210.613 or §2210.6131, as applicable, that the association determines will impact its operations; and

(C) the association's best estimate of the association surcharges needed to pay the debt service required to issue marketable public securities payable under Insurance Code §2210.613 or §2210.6131.

(c) When providing information required under subsection (b)(2) of this section, the association may rely on information and advice provided by TPFA, TPFA consultants, TPFA legal counsel, and third parties retained by the association for this purpose.

(d) The commissioner, after consultation with TPFA, may order that class 2 or class 3 public securities be paid as provided by Insurance Code §2210.6132 if either:

(1) TPFA is unable to issue public securities payable under Insurance Code §2210.613 or §2210.6131, as applicable; or

(2) the issuance of public securities payable under Insurance Code §2210.613 or §2210.6131, as applicable, is financially unreasonable for the association.

Source Note: The provisions of this §5.4127 adopted to be effective March 9, 2016, 41 TexReg 1697