CATASTROPHE SURCHARGES.

(a) The commissioner, in consultation with the board of directors and the comptroller, may order a catastrophe surcharge as provided by this subchapter only if:

(1) before a catastrophic event, the association enters into a financing arrangement with this state that is the basis for the surcharge under Subchapter M-1; or

(2) after a catastrophic event:

(A) the commissioner determines that the association has depleted its reserves, other money, and the catastrophe reserve trust fund; and

(B) the association enters into a financing arrangement with this state that is the basis for the surcharge under Subchapter M-1.

(b) The commissioner, in consultation with the board of directors and the comptroller, shall set the catastrophe surcharge as a percentage of premium to be collected by each insurer to which this subchapter applies.

(c) The total amount authorized to be collected under this section for any catastrophe surcharge may not exceed the amount needed to repay the financing arrangement obligation and administrative expenses to the state under the financing arrangement entered into with this state under Subchapter M-1 that is the basis for the surcharge.

(d) The catastrophe surcharge percentage must be set in an amount sufficient to repay the financing arrangement obligation and administrative expenses to the state under the financing arrangement entered into with this state under Subchapter M-1 that is the basis for the surcharge. The commissioner may set the surcharge as a percentage of premium to collect the needed aggregate amount over a period of time not to exceed three years.

(e) A catastrophe surcharge authorized under this section shall be assessed by insurers on all policyholders of policies that are subject to this subchapter.

(f) A catastrophe surcharge under this subchapter is a separate charge in addition to the premiums collected and is not subject to premium tax or commissions.

(g) Failure by a policyholder to pay a catastrophe surcharge constitutes failure to pay premium for purposes of policy cancellation.

(h) A catastrophe surcharge is not refundable if the policy is canceled or terminated.