The association may buy reinsurance or use alternative risk financing, but it must keep total available loss funding above a stated catastrophe-loss threshold.
Sec. 2210.453. FUNDING LEVELS; REINSURANCE AND ALTERNATIVE RISK FINANCING MECHANISMS; REINSURANCE FROM CERTAIN INSURER OR BROKER PROHIBITED. (a) The association may purchase reinsurance or use alternative risk financing mechanisms or both as necessary. Text of subsection effective until September 01, 2027 (b) The association shall maintain total available loss funding in an amount not less than the probable maximum loss for the association for a catastrophe year with a probability of one in 50. If necessary, the required funding level shall be achieved through the purchase of reinsurance or the use of alternative financing mechanisms, or both, to operate in addition to or in concert with the trust fund, public securities, financial instruments, financing arrangements, and assessments authorized by this chapter. Text of subsection effective on September 01, 2027 (b) The association shall maintain total available loss funding in an amount not less than the probable maximum loss for the association for a catastrophe year with a probability of one in 50. If necessary, the required funding level shall be achieved through the purchase of reinsurance or the use of alternative financing mechanisms, or both, to operate in addition to or in concert with the trust fund, financial instruments, financing arrangements, and assessments authorized by this chapter. Text of subsection effective until September 01, 2027 (c) The attachment point for reinsurance purchased under this section may not be less than the aggregate amount of all funding available to the association under Subchapters B-1 and B-2. Text of subsection effective on September 01, 2027 (c) The attachment point for reinsurance purchased under this section may not be less than the aggregate amount of all funding available to the association under Subchapter B-2. (d) The cost of the reinsurance purchased or alternative financing mechanisms used under this section in excess of the minimum funding level required by Subsection (b) shall be paid by assessments as provided by this subsection. The association, with the approval of the commissioner, shall notify each member of the association of the amount of the member's assessment under this subsection. The proportion of the cost to each insurer under this subsection shall be determined in the manner used to determine each insurer's participation in the association for the year under Section 2210.052. (d-1) The commissioner may adopt a method or approve the association's method of determining the probability of one in 50 for association risks. The commissioner shall provide any adopted or approved method to the association on or before February 1 of each year. (e) A member of the association may not recoup an assessment paid under Subsection (d) through a premium surcharge or tax credit. (f) The association may not purchase reinsurance under this section from an insurer or broker involved in the execution of a catastrophe model on which the association relies in: (1) determining the probable maximum loss applicable for the period covered by the reinsurance; or (2) adopting rates under Section 2210.355. Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 2, eff. April 1, 2007. Amended by: Acts 2009, 81st Leg., R.S., Ch. 1408 (H.B. 4409), Sec. 39, eff. June 19, 2009. Acts 2011, 82nd Leg., 1st C.S., Ch. 2 (H.B. 3), Sec. 36, eff. September 28, 2011. Acts 2015, 84th Leg., R.S., Ch. 615 (S.B. 900), Sec. 20, eff. September 1, 2015. Acts 2019, 86th Leg., R.S., Ch. 790 (H.B. 1900), Sec. 8, eff. June 10, 2019. Acts 2021, 87th Leg., R.S., Ch. 639 (H.B. 769), Sec. 2, eff. September 1, 2021. Acts 2021, 87th Leg., R.S., Ch. 639 (H.B. 769), Sec. 3, eff. September 1, 2021. Acts 2025, 89th Leg., R.S., Ch. 895 (H.B. 3689), Sec. 1.12, eff. September 1, 2025. Acts 2025, 89th Leg., R.S., Ch. 895 (H.B. 3689), Sec. 2.07(a), eff. September 1, 2025. Acts 2025, 89th Leg., R.S., Ch. 895 (H.B. 3689), Sec. 2.07(b), eff. September 1, 2027.