The Texas Department of Insurance has rejected a request from the Texas Windstorm Insurance Association for a 10 percent rate increase for both residential and commercial risks. However, regulators left open the possibility that a rate increase of a lesser amount may be in order.
In an order signed Oct. 15, Texas Insurance Commissioner Mike Geeslin said legislative changes in funding for TWIA necessitated changes in the way the association calculates its funding needs. “The enactment of HB 4409 fundamentally changed the funding mechanism and financial obligations of the Association in the event of a shortfall of available funds,” the order states.
In its rate filing TWIA had calculated its request using a ratemaking approach that was “essentially identical to the ratemaking approach used in previous years,” according to the order.
State Sen. Mike Jackson of Pasadena had recommended no rate increase due to the fact that coastal residents are still recovering from Hurricanes Ike and Dolly, which hit the Texas coast in 2008. The Coastal Windstorm Insurance Coalition had urged rated decreases of 10 percent.
The order states that TDI staff determined that there was no need to raise rates at this time for 2010. However, it recognized that if a catastrophic hurricane were to “occur in 2010 that required the issuance of Class 1 public securities … this could lead to the need for substantial rate increases in 2011.”
Geeslin indicated that increasing TWIA rates at this time would “exacerbate” the burdens faced by Texas living along the coast but recognized that “some modest rate increases” might “be prudent and reasonable so as to mitigate future substantial increases that may otherwise be required.”
TWIA Executive Director Jim Oliver told Insurance Journal that the association’s board at its December meeting would consider whether to pursue another rate filing.
The insurer had 228,000 policyholders as of Sept. 30, according to the Associated Press.