Texas’ top insurance regulator says the precarious financial position of the state’s insurer of last resort for properties in coastal areas is nothing new.
Responding to a letter sent to her by State Rep. John Smithee, chairman of the House Insurance Committee, expressing concerns over the ability of the Texas Windstorm Insurance Association to pay claims, Insurance Commissioner Eleanor Kitzman acknowledged that TWIA’s current structure is not sustainable and that its rates are insufficient.
Smithee wrote to Kitzman about legislative concerns that TWIA would not be able to pay claims for coastal customers if a massive hurricane were to hit heavily populated coastal areas, such as Galveston or Corpus Christi, according to a report in the Austin American Statesman.
TWIA has been under intense regulatory and legislative scrutiny since 2008’s Hurricane Ike wiped out the association’s reserves. A firestorm of litigation ensued over TWIA’s handling claims. Much of that litigation is ongoing. The organization was placed under administrative oversight of the Texas Department of Insurance last year.
Smithee pointed out, among other things, that TWIA’s rates continue to be inadequate and that reinsurance levels are insufficient, the Statesman reported.
In response to Smithee’s letter, Kitzman issued the following statement:
“As has been noted, there are circumstances under which the Texas Windstorm Insurance Association’s (TWIA) current funding options may be insufficient to pay all policyholder claims on a full and/or timely basis. This is not a new development but one that TDI has been monitoring for some time.
“TWIA’s rates have been inadequate for the purchase of sufficient reinsurance that could provide greater protection to policyholders. TWIA’s current structure is simply not sustainable. TDI is currently exploring options for a more viable approach and we look forward to working with the legislature on a comprehensive solution.”
Addressing insurance agents at a recent Independent Insurance Agents of Texas conference in San Antonio, Kitzman said TWIA’s problems are at the top of the insurance department’s to do list. She noted that in her 10 months on the job as insurance commissioners it’s been “all TWIA all the time.”
Kitzman has previously stated that reorganizing TWIA is a top priority for the department. Earlier this year, she hired a consultant to analyze options for creating a more sustainable path for the windstorm insurer and has created a technical advisory group composed of insurance industry professionals to help with that initiative.