(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.         
     Source Note:        The provisions of this §5.4135 adopted to be effective June 12, 2014, 39 TexReg 4435; amended to be effective March 9, 2016, 41 TexReg 1697