Property and Casualty Insurance · Texas statutes and rules pertinent to property and casualty insurance · 10 min read
The Texas FAIR Plan Association and the Texas Windstorm Insurance Association
- Identify the creation, structure, operational rules, and rate requirements of the Texas FAIR Plan Association.
- Explain the purpose, geographic boundaries, eligibility standards, and operational limits of the Texas Windstorm Insurance Association (TWIA).
- Distinguish the roles, member insurer obligations, and agent authority under both the FAIR Plan and TWIA.
Texas FAIR Plan Association: Purpose and Authority
In Texas, some property owners struggle to find basic residential property insurance through standard private companies. The commissioner of insurance may establish a Fair Access to Insurance Requirements Plan (FAIR Plan) to deliver residential property insurance to Texas residents in underserved areas after a public hearing if residential property insurance is not reasonably available in the voluntary market to a substantial number of insurable risks in all or any part of the state (Tex. Ins. Code §2211.051(a)(1)).
Additionally, after a public hearing, the commissioner may establish the FAIR Plan if at least 25 percent of applicants to the residential property market assistance program who are qualified under that program's plan of operation have not been placed with an insurer in the preceding six months (Tex. Ins. Code §2211.051(a)(2)). The commissioner may also include property owners' association insurance in the FAIR Plan for underserved areas if, after notice and a hearing, the commissioner determines that the insurance is not reasonably available in the voluntary market to a substantial number of insurable risks in all or part of the designated area (Tex. Ins. Code §2211.051(b)).
For example, if Carlos owns a home in an area designated by the commissioner as underserved, and private insurance carriers decline to write coverage, Carlos may seek residential protection through the FAIR Plan if the market conditions satisfy these statutory triggers.
Common mistakes
- Believing that an insurance agent who sells TWIA policies acts as an agent of TWIA, when Texas law explicitly states that the agent is not an agent of TWIA (Tex. Ins. Code §2210.016(c)).
- Assuming farm mutual insurance companies are always required to be full TWIA members, when Chapter 911 farm mutuals are actually exempt unless acting as a fronting insurer (Tex. Ins. Code §2210.006(b)(1)).
- Thinking an insured can sue an individual participating carrier over a FAIR Plan claim, when an action on a FAIR Plan policy may be brought only against the association (Tex. Ins. Code §2211.055(b)(2)).
- Assuming claimants can bring private bad-faith lawsuits against TWIA under Texas Insurance Code Chapters 541 or 542, which the statute expressly prohibits (Tex. Ins. Code §2210.014(a)-(b)).
Key points
- After a public hearing, the commissioner may establish the FAIR Plan in underserved areas if the commissioner determines that residential property insurance is not reasonably available in the voluntary market to a substantial number of insurable risks in all or part of the state, or that at least 25 percent of qualified residential property market assistance program applicants have not been placed with an insurer in the preceding six months (Tex. Ins. Code §2211.051(a)).
- The FAIR Plan governing committee consists of 11 members appointed by the commissioner: five insurer representatives, four Texas public members, and two general property and casualty agents (Tex. Ins. Code §2211.052(b)).
- TWIA functions as a residual insurer of last resort for windstorm and hail insurance in designated portions of the seacoast territory, which consists of 14 first tier coastal counties and 14 second tier coastal counties (Tex. Ins. Code §2210.001, §2210.003(10), §2210.005(a)).
- Except as otherwise provided by Chapter 2210, a structure in a catastrophe area whose construction began on or after the 30th day after publication of the plan of operation must comply with its building specifications to be insurable; subsequent specification changes cannot make a structure or addition that complied when construction began ineligible (Tex. Ins. Code §2210.004(b)-(c)).
- New member insurers entering the Texas property market are exempt from participating in TWIA losses and expenses that exceed revenue until their second anniversary of membership (Tex. Ins. Code §2210.052(e)).
- Agents offering or selling TWIA policies are not agents of TWIA, are subject to TWIA compliance audits, and TWIA cannot be sued by individuals under Chapters 541 or 542 (Tex. Ins. Code §2210.014(a)-(b), §2210.016(b)-(c)).
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