Texas Senate Bill 3 (awaiting the Governor’s signature) significantly amended the provisions of Chapter 2210 of the Insurance Code providing for the issuance of public securities by the Texas Public Finance Authority to pay insured losses of the Texas Windstorm Insurance Association (“TWIA”).

Under prior law, such securities could not be issued prior to the occurrence of a windstorm event that resulted in insured losses. S.B. 3 would now allow up to $1 billion of Class 1 securities to be issued on a pre-occurrence basis at the request of the TWIA board and with the approval of the Insurance Commissioner. These pre-occurrence Class 1 securities must mature within 14 years and are payable from TWIA’s net premium and other revenue required to be deposited into a “public security obligation revenue fund.”

In addition, Class 1 public securities would continue to be issuable on an after-occurrence basis; provided that the aggregate amount of Class 1 securities that may be issued during any “catastrophe year” is limited to $1 billion. Further, S.B. 3 would continue to allow Class 2 and 3 securities to be issued on a post-occurrence basis within the limits of the law.

We understand that the issuance of Class 1 securities on a pre-occurrence basis will be given very careful consideration.