In previous legislative years, Texas lawmakers have attempted to tackle the problems of funding for and management of Texas’ insurer of last resort for wind and hail for seacoast properties. This year, numerous pieces of legislation relating to the Texas Windstorm Insurance Association were filed and four made it to Gov. Greg Abbott’s desk.
One, House Bill 769, has only two provisions.
Authored by Rep. Mayes Middleton and Sen. Larry Taylor — both are coastal-area legislators — HB 769 prevents TWIA’s board of directors from voting on a rate increase if there is a vacancy on the board that has existed for 60 days or more. HB 769 also prohibits TWIA from purchasing reinsurance from a broker or insurance company involved in the execution of a catastrophe model the association uses to determine the probable maximum loss (PML) applicable for the period covered by the reinsurance.
The bill, which has been signed into law by Gov. Greg Abbott, is effective Sept. 1.
Senate Bill 1448, among other things, requires that a vote by the board to raise TWIA premium rates must pass by at least a two-thirds majority. As to rate filings, according to the legislative analysis of the bill, it authorizes TWIA to enact a filed rate without prior approval of the state insurance commissioner if “the filed rate does not exceed the rate, rather than does not exceed 105 percent of the rate, in effect on the date on which the filing is made;” and “the commissioner has not disapproved the filing in writing, advising of the reasons for the disapproval and the criteria TWIA is required to meet to obtain approval.”
SB 1448 was signed by the governor on May 26 and goes into effect Sept. 1.
House Bill 2920 allows for a grace period of 10 days for payment of premiums on insurance policies renewed by TWIA. Signed by the governor on June 7, the effective date for HB 2920 is Sept. 1.
House Bill 3564 prohibits the Texas Department of Insurance from rescinding a certificate of compliance for a completed or ongoing improvement for purposes of coverage under a TWIA policy after a certificate has been issued. That prohibition applies to certificates that are in effect or issued on or after the bill’s effective date.
HB 3564 was signed by Gov. Abbott on June 14 and became effective on that date.
2021 Hurricane Season
TWIA has said it has access $4.03 billion in funding for the 2021 season, less the $4.2 billion that was available to the insurer in 2019 and 2020.
While various weather research organizations have predicted an average to above average hurricane season for 2021, none are projecting a season like 2020 with its record-breaking 30 named storms, 11 of which made landfall in the continental U.S.
Still, the 2021 season for tropical weather systems is off and running. Tropical Storm Ana jumped the gun on the traditional June 1 start of the Atlantic hurricane season when it became a named storm on May 23. And Tropical Storm Claudette dumped heavy rains on Southeast Louisiana before it quickly moved eastward on June 10.
Though it is not a state agency, TWIA was created in 1971 by the Texas Legislature to provide wind and hail coverage for properties unable to obtain such insurance in the private insurance market. The association does not receive funds from the state and is reliant on premiums, as well as other mechanisms, including assessments of member insurance companies, if necessary, to fund its operations and pay claims.
TWIA provides coverage for 14 first tier and parts of Harris County. In the five decades of its existence, TWIA has paid a total of $5.9 billion in claims, according to its annual report and catastrophe plan dated June 1, 2021.
The association was established in response to Hurricane Celia, which hit the Texas Gulf Coast in August 1970 as a Category 4 storm. Following Celia, which resulted in $390 million in insured losses, more than a half a billion dollars in total losses, and 16 deaths, private insurers began to pull out of the state’s coastal property market.
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