Texas Independent Agents Urge Adequate Windstorm Funding

Since funding for the Texas Windstorm Insurance Association (TWIA) has become a top priority for the Texas Legislature, statewide lawmakers have debated several solutions that will impact policyholders in Texas, according to the Independent Insurance Agents of Texas (IIAT).

“We’ve seen what happens when a large storm hits our coast,” said David VanDelinder, IIAT executive director. “If we don’t put adequate funding in place for the 2009 season, we could wreck our insurance markets and the state budget with one more Hurricane Ike.”

When hurricane season arrives in June, TWIA will be funded largely by insurance company assessments and state revenues. “Insurance companies should play a role in funding TWIA losses, but that role should be manageable and not so large that it scares companies from writing business in the state,” said VanDelinder.

The storms of 2008 cost TWIA six times the premium collected in the previous year. In just one year, 2008 storms depleted a 36-year surplus of reserves and recent scientific storm models estimate damage from another large storm in Texas as high as $8 billion.

“In other states, we’ve watched insurers pull out of the market after a series of major storms, leaving the state’s taxpayers and policyholders to foot the bill,” said VanDelinder. “If we charge an unlimited amount of assessments on insurance companies or don’t allow them to recoup their losses, they’ll have to charge policyholders higher premiums or stop writing policies in Texas. Either way, that’s bad news for homeowners and businesses throughout Texas, not just on the coast.”

Research from the Perryman Group in 2006 after Hurricane Katrina, found Texas’ economic success is directly linked to Gulf Coast industries. Approximately 40 percent of jobs and incomes across the state are tied to coastal industries such as transportation and oil and gas.

“Our legislators recognize coastal policyholders cannot pay all losses themselves and this is really a statewide issue,” said Lee Loftis, IIAT director of governmental affairs. “The best solution is the one that maintains a healthy insurance market for the state.”

Currently public securities, such as bonds, have been proposed as an appropriate means of re-funding TWIA and building up its reserves to protect the state from the financial consequences of another major storm. It has also been proposed that the state lend $1.5 billion from its Rainy Day Fund to help pay for claims. Bills filed to date suggesting a new means of funding for TWIA include HB 911 by Rep. John Smithee (R-Amarillo), HB 3853 by Rep. Craig Eiland (D-Galveston) and SB 14 by Sen. Troy Fraser (R-Horseshoe Bay).

Topics Mergers & Acquisitions Catastrophe Natural Disasters Texas Agencies Windstorm