Relating to funding of excess losses and operating expenses of the Texas Windstorm Insurance Association; authorizing an assessment; authorizing a surcharge.

Contracts

• Reinsurance Treaties: Member insurers must review treaties immediately. You must verify if current reinsurance covers the new statutory $1 billion member assessment tier or if a specific buy-back is required.
• MGA/TPA Agreements: Contracts with third-party administrators must be amended to explicitly require the collection, segregation, and remittance of the new Catastrophe Surcharge.
• Policy Documents: All policies subject to the surcharge must include the statutory disclosure statement: *"A CATASTROPHE SURCHARGE HAS BEEN INCLUDED ON YOUR POLICY..."*

Hiring/Training

• Billing & Collections Staff: Train staff on the "Cancellation Trap." Personnel must understand that under HB3689, a policyholder's failure to pay the surcharge constitutes failure to pay the premium. Partial payments (premium only) must be rejected or treated as non-payment, triggering cancellation protocols.
• Accounts Payable (Policyholders): Business owners must update internal payment protocols to ensure full payment of insurance invoices, as disputing a surcharge while paying the base premium will result in loss of coverage.

Reporting & Record-Keeping

• Mandatory Disclosure: Insurers must draft and integrate the statutory surcharge disclosure form into policy generation systems.
• Board Notification: Member insurers purchasing reinsurance to cover potential assessments must notify the TWIA Board *before* an occurrence.
• Fund Segregation: Insurers must establish separate accounting ledgers for collected surcharges; these funds are state property and cannot be commingled with general premium revenue.

Fees & Costs

• Catastrophe Surcharge: A variable percentage of the premium (capped at the amount needed to repay state financing over 3 years) applied to all policyholders post-event.
• Member Assessment: Insurers face an aggregate assessment liability of up to $1 billion per catastrophe year.
• IT Development Costs: Insurers must budget immediately for billing system reconfigurations to handle a tax-exempt, pass-through surcharge line item.