The Texas Legislature’s Texas Joint Committee on Wind-storm Coverage and Budgetary Impact held a public hearing in Corpus Christi in late August, and two of the state’s agent associations–the Independent Insur-ance Agents of Texas (IIAT) and Texas Insurance Professionals (PIA Texas)–urged lawmakers to make the windstorm issue a priority. The committee is exploring solutions for restructuring the state’s windstorm pool to ensure adequate funding to meet catastrophic storm losses and to preserve the state’s general revenue funds.
Noting that during the past year little or nothing has been done by the legislature or the Texas Department of Insurance to respond to the underfunded Texas Windstorm Insurance Association (TWIA), PIA Texas called upon lawmakers to address the needs of those who live and work on the coast for adequate coverage , and for the rest of Texas policyholders to have equitable rates. PIA asked that action be taken now, in advance of the next legislative session, which begins in January 2007.
The IIAT proposed a set of guiding principles before the Joint Committee during the public hearing. In testimony on behalf of IIAT, Bob Shepard, IIAT director, chairman of the IIAT Windstorm Task Force and chairman of the board of Shepard Walton King Insurance Group in Harlingen, shared the following principles with the joint committee:
- IIAT advocates that any change in windstorm pool funding or structure should support and encourage the writing of wind insurance by the voluntary market both along the coast and across the state. A voluntary market will work only as long as companies can make a profit over time.
- Bonds are an appropriate means of funding TWIA losses and in building a reserve fund prior to catastrophes. Pre-funding of TWIA losses is an issue IIAT believes must be addressed by whatever plan comes out of this committee.
- The ultimate costs of hurricanes should be borne to some degree by all policyholders in Texas. It is not reasonable to expect the state, the insurance industry or coastal policyholders alone to bear the entire cost of storms. Mega storms can affect the economy of the entire state.
- Insurance companies writing insurance in Texas should share in the costs of TWIA windstorm claims through assessments. Changing the assessment formula to include auto insurers, commercial insurance providers and other companies would recognize the benefits these companies realize by writing insurance in one of the largest and healthiest economies in the country.
- A company should be allowed to recoup excess losses, above some minimum assessments, from policyholders over a period of years. Allowing such recovery of losses above some level of retention would avoid the unlimited losses that insurance companies face under the current funding formula and encourage companies to write property insurance in Texas.
- Strict enforcement of current building codes is critical to the insurance market on the coast. The effects of Hurricane Katrina provided clear evidence of the need for strong building codes to protect property and people against wind damage. While Texas has adopted a strong building code for coastal property, enforcement is spotty and needs to be improved. Manda-tory inspection of new construction, leading to a certificate of compliance, will reduce property losses and save lives.