Is the Texas Windstorm Insurance Association a state agency barred from using its funds to lobby the Legislature?

Plain-English summary

The Texas Windstorm Insurance Association (TWIA) is the state's insurer of last resort for windstorm and hail coverage along the coast. The chair of the House Committee on Elections asked the AG whether TWIA is a "state agency" subject to Government Code section 556.006, the statute that bars a state agency from using appropriated money to try to influence the passage or defeat of legislation. The question matters because if TWIA is a state agency, the chapter 556 lobbying restriction applies to it; if it is not, that particular bar does not reach it.

The AG concluded a court would likely find TWIA is not a state agency for chapter 556 purposes. Chapter 556 defines "state agency" as a department, commission, board, office, or other agency in the executive branch, created under the constitution or a statute, with statewide authority. Drawing on the factor-based analysis from a prior opinion (JC-0161, about the Texas Council for Developmental Disabilities), the AG ran TWIA through similar tests and found the indicators point away from state-agency status.

The factors the AG weighed: TWIA's board is drawn from the private sector and appointed by the Insurance Commissioner (not the Governor), with industry seats filled from nominees submitted by member insurance companies. Its authority is not statewide but limited to the seacoast territory. It has no rulemaking authority of its own; the Commissioner makes the rules and the board must operate under them. It is subject to Sunset review, but only for review, not abolishment. And it is not funded by taxes or state money: its revenue comes from policyholder premiums, member assessments, reinsurance proceeds, investment income, public-security proceeds, and the Catastrophe Reserve Trust Fund. The AG quoted the Fifth Circuit's decision about TWIA's predecessor, the Texas Catastrophe Property Insurance Association, that the money insurers pay is "private money directed to pay private claims," not state money, even though the state forces insurers to participate.

The AG also pointed out that the Legislature subjected TWIA to the Open Meetings Act and Public Information Act expressly through chapter 2210, rather than by treating it as a "governmental body," which suggests the Legislature knows how to fold TWIA into a statute when it wants to and did not do so for chapter 556. TWIA has express authority to obtain counsel to represent it before the Legislature (which could include lobbying), and both the Sunset Commission and TWIA itself state that TWIA is not a state agency and its employees are not state employees. For all those reasons, the AG concluded that, without a legislative amendment, chapter 2210 does not make TWIA a state agency for chapter 556.

The AG declined the remaining questions. Whether TWIA actually violated section 556.006, and whether a particular Association expenditure complied with chapter 2210, are fact questions an AG opinion does not resolve (citing KP-0302 and GA-1033, where the office declined similar TWIA compliance questions).

What this means for you

If you are a legislator or work on state-agency oversight

Based on this opinion, the chapter 556 ban on using appropriated funds to lobby keys off whether an entity is a "state agency" as chapter 556 defines it. The AG read TWIA as falling outside that definition, and noted the Legislature could change the result by expressly making TWIA subject to chapter 556, just as it did for the Open Meetings and Public Information Acts.

If you work at or with TWIA on compliance

The opinion supports treating TWIA as a residual-market insurer rather than a state agency for chapter 556. It does not decide whether any particular TWIA expenditure was lawful; the AG expressly left questions about specific spending and any alleged violation to fact-finding outside an opinion. TWIA's use of its assets is still limited by section 2210.056.

If you are a coastal policyholder or member insurer

The opinion confirms TWIA's funding comes from premiums, member assessments, reinsurance, and the Catastrophe Reserve Trust Fund, not taxes or state appropriations. That funding structure was central to the AG's conclusion that TWIA is not a state agency.

Common questions

Q: Is TWIA a Texas state agency?
A: The AG concluded a court would likely find it is not, at least for purposes of Government Code chapter 556. TWIA describes itself, and the Sunset Commission describes it, as a residual-market property insurer created by the Legislature, not a state agency.

Q: Why does state-agency status matter for lobbying?
A: Section 556.006 bars a "state agency" from using appropriated money to influence legislation. If TWIA is not a state agency, that specific prohibition does not apply to it.

Q: What facts pointed away from state-agency status?
A: Private-sector board appointed by the Insurance Commissioner, authority limited to the seacoast territory rather than statewide, no rulemaking authority of its own, Sunset review without abolishment, and no funding from taxes or state money.

Q: Did the AG say TWIA can lobby freely?
A: No. The AG only addressed whether chapter 556's state-agency lobbying bar applies. It noted TWIA has authority to obtain counsel to represent it before the Legislature and that lobbyists must register under Government Code section 305.003. It did not opine on any specific expenditure.

Q: Could this change?
A: Yes. The AG noted the Legislature is free to make TWIA expressly subject to chapter 556 by amendment, as it did when it subjected TWIA to the Open Meetings Act and Public Information Act.

Background and statutory framework

Government Code chapter 556 governs political activities by certain public entities; section 556.006(a) bars a state agency from using appropriated money to influence legislation, and section 556.001(2)(A) defines "state agency." TWIA is governed by Insurance Code chapter 2210: section 2210.001 sets its purpose as a residual insurer for the seacoast territory, sections 2210.051–.052 require property insurers to be members and share losses, and section 2210.102 describes the Commissioner-appointed, private-sector board, which is accountable to the Commissioner under section 2210.101. The Legislature subjected TWIA to the Open Meetings and Public Information Acts through section 2210.108, made it subject to Sunset review (not abolishment) under section 2210.002(b), and placed rulemaking with the Commissioner (section 2210.008). TWIA's revenue sources are statutory (premiums, assessments, reinsurance, the Catastrophe Reserve Trust Fund) and exclude taxes and state funds.

The AG drew the factor analysis from prior opinion JC-0161 and relied on Tex. Windstorm Ins. Ass'n v. Poole (recognizing TWIA's private attributes) and Tex. Catastrophe Prop. Ins. Ass'n v. Morales (insurer money is private, not state, money). It declined the compliance questions citing KP-0302 and GA-1033.

Citations and references

Statutes and rules:

• Tex. Gov't Code ch. 556 (political activities; appropriated-funds lobbying ban)
• Tex. Ins. Code ch. 2210 (Texas Windstorm Insurance Association)
• Tex. Gov't Code § 305.003 (lobbyist registration)

Key cases:

• Tex. Catastrophe Prop. Ins. Ass'n v. Morales, 975 F.2d 1178 (5th Cir. 1992) (insurer money forced into the program is private money, not state money)
• Tex. Windstorm Ins. Ass'n v. Poole, 255 S.W.3d 775 (Tex. App.—Amarillo 2008, pet. denied) (TWIA has attributes of a private insurance business)
• Brown v. Univ. of Tex. Health Ctr., 957 S.W.2d 911 (Tex. App.—Tyler 1997, no pet.) (state-agency status affects many statutes, e.g., sovereign immunity)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/ken-paxton/kp-0398
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2022/kp-0398.pdf

Original opinion text

January 26, 2022

The Honorable Briscoe Cain
Chair, House Committee on Elections
Texas House of Representatives
Post Office Box 2910
Austin, Texas 78768-2910

Opinion No. KP-0398

Re: Application of chapter 556 of the Government Code to the Texas Windstorm Insurance Association (RQ-0419-KP)

Dear Representative Cain:

You ask several questions involving the application of Government Code section 556.006 to the Texas Windstorm Insurance Association ("TWIA" or the "Association").¹

Government Code chapter 556 governs political activities by certain public entities and individuals. See TEX. GOV'T CODE §§ 556.001–.009. Subsection 556.006(a) provides: "A state agency may not use appropriated money to attempt to influence the passage or defeat of a legislative measure." Id. § 556.006(a). State agency is defined for purposes of chapter 556 to mean, in relevant part, "a department, commission, board, office, or other agency in the executive branch of state government, created under the constitution or a statute, with statewide authority[.]" Id. § 556.001(2)(A). You first ask whether TWIA is a state agency subject to section 556.006. See Request Letter at 1.²

¹ See Letter from Honorable Briscoe Cain, Chair, House Comm. on Elections, Tex. House of Representatives, to Honorable Ken Paxton, Tex. Att'y Gen. at 1 (July 29, 2021) ("Request Letter").

² An entity's status as a "state agency" has implications for numerous statutes outside chapter 556 of the Government Code. See, e.g., Brown v. Univ. of Tex. Health Ctr., 957 S.W.2d 911, 914 (Tex. App.—Tyler 1997, no pet.) (concluding that a university's status as a state agency bars breach of contract and tortious interference claims under the doctrine of sovereign immunity).

Attorney General Opinion JC-0161 considered the nature of the Texas Council for Developmental Disabilities as a state agency subject to chapter 556.³ See Tex. Att'y Gen. Op. No. JC-0161 (1999). The opinion looked at several factors in making its determination: It considered the fact that the board members were appointed by the Governor; that the board members had to be trained on open meetings, public information, and conflict-of-interest laws; that the Council was subject to the Sunset Act; that the Council had rulemaking authority; and that the Council had statewide authority to perform its duties. Id. at 3. We consider those and other relevant factors in our examination of whether TWIA qualifies as a state agency for purposes of chapter 556.

³ You and the Association both refer us to Attorney General Opinion JC-0161, which examined whether an entity was subject to chapter 556. See Request Letter at 2–3; Brief from Michael Wilson, Perkins Law Group PLLC, to Office of the Att'y Gen., Op. Comm., at 6, 8–9 (Aug. 31, 2021).

The primary purpose of TWIA is to provide an adequate market for windstorm and hail insurance in Texas seacoast territories. See TEX. INS. CODE § 2210.001. The Legislature requires all property insurers authorized to engage in the business of property insurance in Texas, other than insurers prevented by law from writing on a statewide basis those coverages available through TWIA, to be members of TWIA. Id. § 2210.051(a)–(b); see id. §§ 2210.006, .051(b) (to engage in business of insurance in Texas, property insurer must be member of TWIA). Those members "participate in insured losses and operating expenses" of the Association based on each member's proportionate share of the net direct premiums compared to all members of the Association. Id. § 2210.052(a).

TWIA is governed by a board of directors that includes representatives of the insurance industry and residents of the seacoast territories. See id. § 2210.102(a)–(c). Members of the board are individuals from the private sector appointed by the Insurance Commissioner, and when vacancies arise in the positions statutorily dedicated for representatives of the insurance industry, the Commissioner must select those members from a slate of nominees provided by the member insurance companies. See id. § 2210.102(f)–(g); see also id. § 31.001(1) (defining "commissioner" for purposes of the Insurance Code as the Insurance Commissioner); Tex. Windstorm Ins. Ass'n v. Poole, 255 S.W.3d 775, 777 (Tex. App.—Amarillo 2008, pet. denied) (acknowledging that what TWIA "truly is escapes easy categorization" but recognizing that TWIA's membership derives from the private sector and that it has attributes of a private insurance business). Moreover, the board is not independent, as chapter 2210 makes it "responsible and accountable to the commissioner." TEX. INS. CODE § 2210.101.

Members of the board are required to be trained on open meetings, public information, and conflict-of-interest laws. See id. § 2210.1031(b)(5) (requiring TWIA board members to be trained in specified laws). Rather than relying on the definition of "governmental body" in the Open Meetings Act or the Public Information Act, the Legislature chose to make TWIA subject to those acts through chapter 2210.⁴ See id. § 2210.108(a) (subjecting TWIA to chapters 551 and 552 of the Government Code).

The Association is subject to the Sunset Act but only for review and not for abolishment.⁵ Id. § 2210.002(b). TWIA does not have rulemaking authority. Rather, that authority resides with the Commissioner. See, e.g., id. §§ 2210.008(b) (authorizing the commissioner to adopt rules to implement chapter 2210); see also id. § 2210.107(a)(1) (requiring the board to operate in accordance with the commissioner's rules). The Association's authority to provide windstorm and hail insurance is not statewide but limited to the seacoast territory of the State. See id. §§ 2210.001 (identifying the purpose of the Association is "to serve as a residual insurer of last resort for windstorm and hail insurance in the seacoast territory"), 2210.003(10) (defining "seacoast territory"), 2210.004 (defining insurable property), 2210.053(a) (authorizing TWIA's insurance offerings "with respect to . . . insurable property").

⁴ Since 2009, the Legislature has made significant changes to chapter 2210 to reshape TWIA's governance and funding. See Act of June 1, 2009, 81st Leg., R.S., ch. 1408, §§ 5–48, 2009 Tex. Gen. Laws 4396, 4398–4415; Act of May 22, 2013, 83d Leg., R.S., ch. 1228, §§ 1–5, 2013 Tex. Gen. Laws 3088, 3088–89; Act of May 25, 2015, 84th Leg., R.S., ch. 615, §§ 1–34, 2015 Tex. Gen. Laws 2036, 2036–49. The Legislature is free to make TWIA expressly subject to Government Code chapter 556. See, e.g., TEX. INS. CODE § 2210.108 (subjecting TWIA to the Open Meetings Act and the Public Information Act).

⁵ The Sunset Advisory Commission does not consider TWIA a state agency. See SUNSET ADVISORY COMMISSION, STAFF REPORT WITH FINAL RESULTS (2018–2019), at A3 ("SUNSET ADVISORY COMM'N REPORT").

In addition to the factors considered in our prior opinion, we note that the Association is not funded by taxes or state funds.⁶ Its revenue comes from policyholder premiums; member assessments; reinsurance proceeds; investment income; public security proceeds; and funds from the Catastrophe Reserve Trust Fund. See id. §§ 2210.203(a) (premiums), 2210.351–.353 (premium rates), 2210.259 (surcharge on non-compliant insured structure), 2210.453 (reinsurance), 2210.505 (reinsurance), 2210.0715 (reserves and trust fund), 2210.451–.4521 (Catastrophe Reserve Trust Fund), 2210.072–.0742 (public securities and assessments). The Fifth Circuit considered TWIA's predecessor entity, the Texas Catastrophe Property Insurance Association,⁷ which had a similar funding structure and observed: "That the state holds, and exercises, the coercive power to force private insurers doing business in Texas to cover certain risks does not mean that the money coming out of the companies' bank accounts is state money. It is private money directed to pay private claims." Tex. Catastrophe Prop. Ins. Ass'n v. Morales, 975 F.2d 1178, 1182–83 (5th Cir. 1992).

⁶ The Sunset Advisory Commission recognizes that TWIA receives no funding from tax dollars or the General Revenue Fund. See SUNSET ADVISORY COMM'N REPORT at A3, A8.

⁷ See Act of Apr. 13, 1971, 62d Leg., R.S., ch. 100, § 1, 1971 Tex. Gen. Laws 843, 843–51 (creating the Texas Catastrophe Property Insurance Association); See Act of May 15, 1997, 75th Leg., R.S., ch. 438, § 2, 1997 Tex. Gen. Laws 1707, 1707–08 (changing the name of the Texas Catastrophe Property Insurance Association to the Texas Windstorm Insurance Association).

Finally, TWIA has express authority to obtain legal counsel for representation before the Texas Legislature, which representation could include lobbying. See TEX. INS. CODE § 2210.055(a); 28 TEX. ADMIN. CODE § 5.4001(b)(4) (Tex. Dep't of Ins., Plan of Operation); see also TEX. GOV'T CODE § 305.003(a)–(b) (requiring registration of lobbyists). And the Sunset Commission has concluded in its review that "TWIA is not a state agency" and that "TWIA employees are not state employees and do not receive state benefits."⁸ For these reasons, without a legislative amendment, a court would likely conclude that chapter 2210 of the Insurance Code does not establish TWIA as a state agency for purposes of chapter 556 of the Government Code.

Your additional questions asking whether TWIA violated section 556.006 and whether a particular Association expenditure complies with chapter 2210 are fact questions outside the purview of an Attorney General opinion. See Tex. Att'y Gen. Op. Nos. KP-0302 (2020) at 1 (declining to opine on questions regarding the Association's compliance with various laws); GA-1033 (2012) at 1 (declining to opine on questions regarding the Association's alleged failure to perform its statutory duties); TEX. INS. CODE § 2210.056 (limiting the purposes for which the Association may use its assets).

⁸ See SUNSET ADVISORY COMM'N REPORT at A3. This is corroborated by TWIA itself in its statements that it is not a state agency, but rather a residual market property insurance company created by the Texas Legislature. See https://www.twia.org/frequently-asked-questions (stating that "TWIA is a residual market property insurance company and is not a state agency.").

S U M M A R Y

Government Code chapter 556 prohibits a state agency from using appropriated funds to engage in certain lobbying activities. A court would likely conclude that chapter 2210 of the Insurance Code does not establish the Texas Windstorm Insurance Association as a state agency for purposes of chapter 556.

Very truly yours,

KEN PAXTON
Attorney General of Texas

BRENT E. WEBSTER
First Assistant Attorney General

LESLEY FRENCH
Chief of Staff

MURTAZA F. SUTARWALLA
Deputy Attorney General for Legal Counsel

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

CHARLOTTE M. HARPER
Assistant Attorney General, Opinion Committee