SECTION 5.4161. Member Assessments Other than Assessments for Reinsurance in Excess of the Association's Statutory Minimum Funding Level

(a) The association, with the approval of the Commissioner, must assess members as provided by Insurance Code Chapter 2210.

(b) The association must provide, in the aggregate for the catastrophe year, the following information when requesting the Commissioner to approve a class 1, class 2, or class 3 assessment under Insurance Code §§2210.0725, 2210.074, or 2210.0742, as applicable:

(1) the association's best estimate of the amount of losses expected to be paid as a result of the event, or series of events, that caused the need for the assessment requested;

(2) the amount of losses paid, or expected to be paid, from premium and other revenue of the association;

(3) the amount of losses paid, or expected to be paid, from available reserves of the association and available amounts in the CRTF;

(4) the amount of losses paid, or expected to be paid, from the proceeds of class 1 public securities issued, or expected to be issued;

(5) the amount of class 1 assessments previously approved and the amount of class 1 assessments now requested;

(6) in the case of a request to approve a class 2 or class 3 assessment, the amount of losses paid, or expected to be paid, from the proceeds of class 2 public securities issued, or expected to be issued;

(7) in the case of a request to approve a class 2 or class 3 assessment, the amount of class 2 assessments previously approved and the amount of class 2 assessments now requested;

(8) in the case of a request to approve a class 3 assessment, the amount of losses paid, or expected to be paid, from the proceeds of class 3 public securities issued, or expected to be issued;

(9) in the case of a request to approve a class 3 assessment, the amount of class 3 assessments previously approved and the amount of class 3 assessments now requested.

(c) If all or any portion of the authorized principal amount of class 1 public securities requested under §5.4124 or §5.4125 of this title (relating to Issuance of Class 1 Public Securities before a Catastrophic Event and Issuance of Public Securities after a Catastrophic Event) cannot be issued based on the factors described in §5.4135 of this title (relating to Marketable Public Securities; the Amount of Class 1 Public Securities that Cannot be Issued; Market Conditions and Requirements; and Cost-Benefit Analysis), the association may request and the Commissioner may approve the imposition of class 1 assessments as provided in this section.

(d) In its request to the Commissioner to approve the imposition of assessments under subsection (c) of this section, the association must submit the following information:

(1) the information required by subsection (b) of this section;

(2) information based on the analyses described in §5.4135 of this title;

(3) the amount of class 1 public securities that can be issued;

(4) the amount of class 1 public securities that cannot be issued; and

(5) the specific reasons, market conditions, and requirements that prevent TPFA from issuing all or any portion of the authorized principal amount of class 1 public securities. 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.

(e) The association must request the issuance of the statutorily authorized principal amount of class 1 public securities before the association may request the Commissioner approve a class 1 assessment under Insurance Code §2210.0725.

(f) The association must request the issuance of the statutorily authorized principal amount of class 2 public securities before the association may request the Commissioner approve a class 2 assessment under Insurance Code §2210.074.

(g) The association must request the issuance of the statutorily authorized principal amount of class 3 public securities before the association may request the Commissioner approve a class 3 assessment under Insurance Code §2210.0742.

(h) If the Commissioner approves the imposition of assessments under subsection (c) of this section, any class 2 and class 3 public securities must be issued as provided by Insurance Code Chapter 2210 and these rules.

(i) The association may use the proceeds from assessments only for losses and expenses resulting from the catastrophe year for which the assessments were made.

Source Note: The provisions of this §5.4161 adopted to be effective February 16, 2011, 36 TexReg 784; amended to be effective March 9, 2016, 41 TexReg 1697; amended to be effective January 6, 2021, 46 TexReg 162