Texas Coastal Lawmakers Urge Denial of Windstorm Insurer’s 10% Rate Increase Request

October 1, 2018

More than 20 state legislators have signed a letter addressed to Texas Insurance Commissioner Kent Sullivan requesting that a 10 percent rate increase filed by the state’s property insurer of last resort for wind and hail along the Texas coast not be approved.

The Texas Windstorm Insurance Association in August filed with the Texas Department of Insurance a 10 percent rate increase for residential and commercial properties that would go into effect next year.

In an announcement on its website, the association said that at its most recent quarterly meeting TWIA’s board made the decision to increase rates for 2019 upon the recommendation of the Actuarial and Underwriting Committee. TWIA said its rates are currently inadequate by 32.2 percent for residential policies and 37.3 percent for commercial policies.

The proposed rate increase must be approved by the insurance commissioner. If approved, it will go into effect Jan. 1, 2019. New business and renewal policies issued in 2018 would not be subject to the rate increase until the policies renew in 2019.

In the letter to Commissioner Sullivan, members of Texas’ coastal legislative delegation said the 10 percent rate increase would be “unfair, excessive and unreasonable” for coastal residents who continue to struggle to recover from Hurricane Harvey, which made landfall in Texas in late August 2017.

“The restoration of businesses and homes is ongoing, and local tax bases face uncertainty as their values depend on residents’ capacity to adjust to higher costs associated with building, and now insuring, those structures. The lingering economic effects of Harvey have negatively impacted many TWIA policyholders and any rate increase at this pivotal point would be unfair and unreasonable,” the letter states.

The coastal legislators noted that TWIA has “an unprecedented $4.9 billion available to pay Hurricane Harvey losses.” That amount is far greater than TWIA’s total loss estimate from that hurricane of $1.6 billion, the letter points out. According to the delegation, until the association’s “current level of funding [is] proven to be inadequate to pay projected losses,” a rate increase should be denied.

Then Insurance Commissioner Mike Geeslin set a precedent for disallowing a rate increase following a catastrophic event when he denied TWIA’s filing for a 10 percent rate increase in October 2009, just over a year after Hurricanes Ike and Dolly made struck the Texas coast, the lawmakers said. In his denial of the rate increase, Geeslin recognized that a rate hike following devastating events such as the 2008 hurricanes would hamper the ability of coastal residents to rebuild their homes and businesses.

In their letter, the legislative group cited a number of issues that they believe support their request for the denial of the rate increase. Among them is the composition of the TWIA Actuary and Underwriting subcommittee, which reviews and recommends “a rate to the full TWIA board for purposes of the Association’s annually required rate filing for residential and commercial policies.” The majority are insurance industry employees and “their employers hold a financial interest in TWIA’s annual rate filing process,” the letter states. Because of that lack of diversity, the subcommittee’s rate recommendation “circumvents the will of the state legislature and violates the spirit” of changes to state law made in 2015.

During the 2015 session, lawmakers sought to ensure that three major TWIA stakeholder groups: “first tier coastal counties, non-coastal representatives and industry representatives actively writing and renewing wind and hail insurance along the coast,” are equally and fairly represented, the group asserted. With only insurance industry members on the actuary and underwriting subcommittee, other stakeholders are left out of the rate decision-making process. Therefore, the composition of the committee should be changed to include members of all stakeholder groups, the coastal delegation said.

Lawmakers who signed the letter to Commissioner Sullivan are: Sen. Larry Taylor, District 11; Sen. Paul Bettencourt, District 7; Sen. Brandon Creighton, District 4; Sen. Sylvia Garcia, District 6; Sen. Juan “Chuy” Hinojosa, District 20; Sen. Joan Huffman, Texas Senate District 17; Sen. Lois Kolkhorst, District 18; Sen. Eddie Lucio Jr., District 27; Sen. Judith Zaffirini, District 21; Rep. Dennis Bonnen, District 25; Rep. Greg Bonnen, District 24; Rep. Joe Deshotel; District 22; Rep. Wayne Faircloth, District 23; Rep. Ryan Guillen, District 31; Abel Herrero; District 34; Rep. Todd Hunter, District 32; Rep. Oscar Longoria, District 35; Rep. J.M. Lozano, District 43; Rep. Eddie Lucio III, District 38; Rep. Geanie Morrison, District 30; Rep. Rene Oliveira, District 37; Rep. Dade Phelan, District 21; and Rep. Ed Thompson, District 29.

TWIA filed a request to increase the existing maximum liability limits on windstorm and hail policies insuring residential dwelling and individually owned townhouses and associated contents; contents of apartments, condominiums, or townhouses; commercial structures and associated contents; and governmental structures and associated contents. The Texas Department of Insurance will hold a public hearing on that request on Oct. 8.

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