Texas Insurance News, November 2002 Page: FRONT COVER
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`Texas State DocumentS November 2002JAN 08 2003
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REGULATORY NEWS PUBLISHED BY THE TEXAS DEPARTMENT OF INSURANCE
Commissioner Activates Texas FAIR PlanI Ni S i o 2
Texans Losing Medicare+
Choice Coverage
Colonial Casualty Executives
Indicted in Fraud Lnit Case
Small Employer Reinsurance
System Changes Approved3
9insuraneC
is oruflished each month. Fc, a oe-year
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The staff -hat prepares this newsletter
has ro role in proposing, drafting, ed ting,
or accro /ig TDI rules or poicies or fnte-
oreting statutes. Texas Insurance News
should no-be construed to eprese.nt the
Polc, endorsement or opinion cf the
Ccmrrissicner of Insurance or the Texas
Departmeret of Insurance.
By necessity, summaries of proposed
and a-doo-ed rules ca-not exp:a,n the-r
f;H complexity. Readers interested ig
complete information aoout acminstra-
tive -ules should consult the versions
published :n the Texas Register.
To ire best of the staff's abiit, inform
ration presented in 'h's newsletter is
correct as of the publication date, but
sc7eJuled dates and proposed rules
and amendments may change as the
aaootior process goes forwardOMMISSIONER Jose Montemayor has re-
sponded to evidence of restricted home-
owners insurance availability by estab-
lishing a FAIR (Fair Access to Insurance Require-
ments) plan as the state's residual market for res-
idential property insurance.
Alllicensedinsurers that write residentialproper-
ty insurance in Texas are required to participate
in the FAIR plan. Approximately 130 companies
will be required to participate in the FAIR plan.
The Plan of Operation to be developed in late
October and early November by the FAIR plan
governing committee appointed by the Commis-
sioner will prescribe details for the plan's opera-
tion. By law, the governing committee consists of
five insurer representatives, four public members
and two general property and casualty insurance
agents.
Montemayor received testimony at an October 10,
2002, hearing on the possibility of activating a
FAIR plan and/or expanding of the Texas Wind-
storm Insurance Association to act as a residual
market beyond the coastal areas it presently
serves.
"Given recent announcements by Farmers Insur-
ance Group, it is necessary for the Texas Depart-
ment of Insurance to ensure a safety net exists to
aid those consumers whom Farmers will no
longer accept and who are finding extreme diffi-
culty obtaining homeowners insurance in the
open market," Montemayor said.
Farmers announced in September that it would
non-renew its 700,00 Texas homeowners policies
rather than comply with Montemayor's emergen-
cy cease-and-desist order requiring it to eliminate
homeowners insurance rating practices deemed
violations of Texas consumer protection laws.
'While I have complete confidence that sufficient
capacity exists in the current market to absorb
the vast majority of Farmers' former policyhold-
ers, I believe it is best to undertake proactive
measures to ensure that no one falls through the
cracks as a result of one company's actions," the
Commissioner said.Texas Insurance Code Article 21.49A authorizes
the Commissioner to esta lish a FAIR plan if the
voluntary market is not meeting the coverage
needs of a substantial number of residential prop-
erty owners and at least half the applicants to the
state's residential property insurance Market As-
sistance Program (MAP) have not been placed
with an insurer in a previous 12-month period.
Texas has had a voluntary MAP for residential pro-
perty insurance since 1996. Montemayor made
insurer participation in the MAP mandatory on
October 11, 2002. At that time, 14 insurers were
participating voluntarily in the MAP by receiving
and reviewing applications for coverage.
In his October 23, 2002, order establishing the
FAIR plan, Montemayor noted that two companies
with a combined 50 percent homeowners market
share no longer accept new homeowners busi-
ness and that one of them, with a 20 percent mar-
ket share, had announced plans to non-renew all
its Texas policies as they Expire.
Montemayor also made a finding that in the fiscal
year that ended August 31, 2002, only 40 percent
of the applications to the residential property
MAP resulted in the issuance of a policy-a fig-
ure well below the 50 percent threshold for im-
plementing a FAIR plan.
Texas Insurance Code provisions authorizing the
FAIR plan make it available only to insurable prop-
erties declined by at least two licensed carriers
actually writing residential property insurance.
General P&C agents (formerly known as local
recording agents) may submit applications on be-
half of property owners. Coverage will be provid-
ed by the FAIR plan itself. The plan's rates and
forms are subject to the Commissioner's approval.
In addition, the plan may >btain reinsurance.
If the plan runs a deficit, i: may assess the partici-
pating insurers, which may recoup their assess-
ments over a three-year period by applying premi-
umsurcharges to their Texas property policies. *
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Texas. Department of Insurance. Texas Insurance News, November 2002, periodical, November 2002; Austin, Texas. (https://texashistory.unt.edu/ark:/67531/metapth1624902/m1/1/: accessed June 11, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Government Documents Department.