Current through Reg. 50, No. 13; March 28, 2025
(a) Marketable
public securities under this division are public securities that the
association in consultation with TPFA determines:
(1) are consistent with state debt issuance
policy requirements; and
(2)
achieve the goals of the association.
(b) In determining the amount of class 1
public securities that can or cannot be issued, the association must consider:
(1) the association's current premium and net
revenue;
(2) the effect of
depopulation under Insurance Code Chapter 2210, Subchapter O, on anticipated
net premium and other revenue and anticipated revenue from association
surcharges;
(3) the estimated
amount of debt service for the public securities, including any contractual
coverage amount;
(4) the
association's obligations for outstanding public securities, including
contractual coverage requirements and public security administrative
expenses;
(5) the association's
obligations for other financing arrangements;
(6) any conditions precedent to issuing class
1 public security obligations contained in any applicable public security
financing documents;
(7) TPFA
administrative rules;
(8)
applicable State of Texas debt issuance policies;
(9) administrative rules of the Office of the
Attorney General of Texas that require evidence of debt service and other
obligation coverage; and
(10)
market conditions and requirements necessary to sell marketable public
securities, including issuing classes in installments.
(c) The association may rely on the advice
and analysis of TPFA, TPFA consultants, TPFA legal counsel, and third parties
the association has retained for this purpose in determining market conditions
and requirements under subsection (b) of this section. The association's
determination may include consideration of the following factors:
(1) interest rate spreads;
(2) municipal bond ratings of the public
securities;
(3) prior issuances of
catastrophe-related public securities in Texas or any other state;
(4) similar financings in the market within
the preceding 12 months;
(5) news
or other publications relating to the association or the issuance of
catastrophe-related public securities;
(6) a nationally recognized investment
banking firm's confidence memorandum;
(7) legal and regulatory conditions;
and
(8) any other market conditions
and requirements that the association deems necessary and
appropriate.
(d) As part
of each request for public securities, the association must submit to the
commissioner a cost-benefit analysis of the various financing methods and
funding structures that are available to the association. The cost-benefit
analysis must include:
(1) for public
securities requested under § 5.4124 of this division (relating to Issuance
of Class 1 Public Securities before a Catastrophic Event):
(A) estimates of the monetary costs of
issuing public securities, including issuance costs, debt service costs, and
any contractual coverage requirement;
(B) the benefits associated with issuing
public securities, including benefits to the association's claim-paying
capabilities, liquidity position, and other benefits associated with issuing
public securities before a catastrophic event; and
(C) estimates of the monetary costs,
associated benefits, and the availability of funding alternatives, such as
providing financing arrangements or additional financing arrangements, that
provide similar funding and at a similar layer;
(2) for public securities requested under
this division following a catastrophic event:
(A) estimates of the monetary costs of
issuing public securities, including issuance costs, debt service costs, and
any contractual coverage requirement;
(B) the benefits associated with issuing
public securities, including benefits to the association's claim-paying
capabilities and other benefits associated with issuing public securities;
and
(C) the availability of
alternative funding arrangements, if any, including the monetary costs and
benefits associated with any available alternative funding
arrangements.
