Texas Insurance Commissioner Mike Geeslin ordered the rates of homeowners that purchase windstorm coverage from the Texas Windstorm Insurance Association (TWIA) to remain unchanged, while increasing commercial rates five percent, according to the Insurance Council of Texas (ICT). ICT, which represents more than 500 insurance companies writing homeowner, auto and workers compensation in the state, questioned why the commissioner failed to raise residential property rates.
“Windstorm rates for the Texas coast have been historically inadequate,” said ICT Executive Director Rick Gentry.
“Now that we have experienced the devastation first hand and have forecasts calling for many more hurricanes, to set a zero percent increase for windstorm rates for residents who have built their homes directly on the water’s edge is difficult to comprehend,” Gentry said. “The whole concept of insurance is to prepare for the future and the commissioner’s decision does not do that.”
Although TWIA actuarial data indicated a much higher increase was needed, TWIA’s Board of Directors had recommended a 10 percent increase for both residential and commercial rates, the maximum amount allowed by law. The recommendation to ask for an increase in windstorm rates was the first time that the board, which is comprised of insurers, agents and consumers, had unanimously agreed on any rate change. The vote was taken before Hurricane Katrina and Rita had hit.
Commenting on the rating decision, Commissioner Geeslin stated, “Based on the actuarial data reviewed by my staff and on economic hardships suffered by many Gulf Coast residents as a result of Hurricane Rita, I cannot support residential windstorm rate increases at this time. Once additional data on future reinsurance costs and losses from Hurricane Rita are available, another rate review will be conducted. Actuarial data available now, however, does support a modest 5 percent increase in commercial windstorm rates.
“As we go forward, the state must look toward increasing the catastrophe reserve fund to adequately cover hurricane losses, and many policyholders may need to pay additional premiums, at their option, to increase coverage levels so that their homes are insured to the proper level,” Geeslin said in the statement.
Texas insurers paid out $2.2 billion for almost 200,000 claims for Hurricane Rita, the ICT said. TWIA assessed insurers an additional $100 million for Rita’s damage along the coast.
TWIA is the insurer of last resort for wind and hail coverage in the fourteen coastal counties and parts of Harris County.
“TWIA expects between 10,500 and 11,000 claims associated with Hurricane Rita with an estimated cost of $125-150 million,” said Jerry Johns, spokesman for TWIA. “In addition, the recent active hurricane season in the U. S. could increase the cost the Association pays for reinsurance by as much as 20 percent or more. All of these factors contribute to increases in losses and assessments to member companies of TWIA.”
Topics Catastrophe Carriers Texas Hurricane
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