Texas Windstorm Insurance Association policyholders’ rates will go up begining Feb. 1, 2008, as a result of rate increases approved by the Texas Department of Insurance yesterday.
Texas Insurance Commissioner Mike Geeslin approved rate increases of 8.2 percent for residential and 5.4 percent for commercial properties covered by TWIA, the state’s insurer of last resort for windstorm coverage.
TWIA had requested a 10 percent increase for both in a filing made in August 2007.
Much of the rate increase comes from raising the portion of the rate intended for adding to TWIA’s Catastrophe Reserve Trust Fund (CRTF) to 25 percent, TDI said. The catastrophe fund has not kept up with the growth in TWIA exposure over the last few years – as TWIA has experienced significant increases in new policyholders as a result of private insurance companies pulling away from the designated catastrophe area.
TWIA spokesman Jerry Johns, president of the Southwestern Insurance Information Service, said “the commissioner’s decision should be welcome news to coastal residents who depend on TWIA to have adequate funds to pay claims in the event of a hurricane or multiple hurricanes.”
“This increase is a necessary part of our long-term strategy to improve the financial health of the Windstorm Association,” Geeslin stated in a departmental announcement. “Money put into the CRTF is available as a safety net to pay losses in the event of a major hurricane, unlike reinsurance that has been purchased the past several years.”
The Commissioner noted that other measures are under consideration as well to shore up the financial strength of TWIA, including alternate funding sources, loss mitigation efforts, and administrative controls.
Based on estimated average annual premium for a residential TWIA policy of $1,023, the rate increase would add $84 per year to the cost of the typical policy. TWIA policyholders would see the increase at the time of their policy renewal, beginning Feb. 1, 2008.
“Coastal TWIA customers must understand that the cost of rebuilding homes and business has increased dramatically, partially fueled by the enormous amount of residential and commercial construction along the Gulf coast,” Johns said.
He added that the rate increase will help the association “to pay legitimate claims when disaster strikes.” TWIA policyholders should feel confident the insurer will respond when help is needed, Johns said.
Source: Texas Department of Insurance, Southwestern Insurance Information Service