Rate Change Granted for Texas Windstorm Insurance Association

Commercial and residential rates for policies written through the Texas Windstorm Insurance Association (TWIA) will rise in February when rate increases approved by the Texas Department of Insurance (TDI) go into effect.

Texas Insurance Commissioner Mike Geeslin approved rate increases of 12.3 percent for residential and 15.6 percent for commercial policies, effective Feb.1, 2009. State law caps rate changes for the Windstorm Association at 10 percent, but TDI has the authority to suspend the cap after catastrophic losses.

“These rate increases are a continuation of our long term goal to build up the financial strength of TWIA,” stated Commissioner Geeslin. “While some may argue that they need to be higher, we need to be mindful that our coastal region is in recovery. Coastal residents are overburdened as it is.”

Insurer trade groups were quick to praise TDI’s actions.

“We agree with Commissioner Geeslin that his decision today to raise both TWIA commercial and residential rates is the first step needed to fund the depleted Catastrophe Reserve Trust Fund,” said Mark Hanna, spokesman for the Insurance Council of Texas. “We hope that members of the Texas Legislature will address this problem in a manner that will provide financial stability for the wind pool and its policyholders.”

“There is a broad agreement that TWIA must have sufficient funds to pay all legitimate claims in the event of another Hurricane Ike, or worse. TWIA is not a bottomless financial well,” said Jerry Johns, a spokesman for TWIA and president of Southwestern Insurance Information Service. “The money to pay claims has to come from somewhere. Increasing rates for TWIA policyholders is one of many ways to be certain that TWIA will be in a stronger financial position when people living along the Texas coast suffer wind damage to their property.”

TDI said to date, insurers have been assessed $530 million to pay claims from hurricanes Dolly and Ike, $230 million of which is subject to tax credits.

The Commissioner noted that TDI will continue to work with the Legislature on new ways to improve funding for TWIA that will lessen the reliance on state revenues and ultimately Texas taxpayers.

“Adequate reserves cannot be rebuilt overnight,” said Commissioner Geeslin. “It’s a gradual process that takes time, and the rate increase announced today is just one step.”

TWIA policyholders will see the increase at the time of their policy renewal, beginning Feb. 1.

Topics Catastrophe Natural Disasters Texas Windstorm