Study Shows Impact of Property Protections on Texas Windstorm Insurer Rates

January 7, 2021

A report prepared by Willis Towers Watson showing the potential impact of increased coastal building standards on premium rates for Texas’ property insurer of last resort for coastal counties is now available for public review.

The report finds that if every property insured by the Texas Windstorm Insurance Association (TWIA) in the most exposed areas had exterior opening protections, TWIA rates would be inadequate by 11% for residential policies and 20% for commercial policies.

TWIA’s Actuarial & Underwriting Committee had requested that WTW perform model runs exploring hypothetical scenarios in which all TWIA-insured properties had exterior opening protection (such as hurricane shutters, reinforced garage doors, impact resistant glass, and other wind debris-resistant coverings).

WTW’s report shows the theoretical impact to modeled output and rate indications if all TWIA insured buildings in the Seaward and Inland 1 areas were upgraded to meet the current building code standards for exterior openings (windows and doors).

The purpose of this analysis was to provide a range of outcomes. It is not modeling an actual scenario and does not change WTW’s previous finding that TWIA’s rates for residential policies are inadequate by 26 percent, and rates for commercial policies are inadequate by 44 percent.

Components of the WTW report on TWIA rate adequacy with “notional,” or theoretical, scenarios of RMS Opening Protection / AIR Window Protection modifiers are as follows:

Summary Table

Notional Scenario 1 – Seaward Properties Having Opening Protection – Residential Exhibit

Notional Scenario 1 – Seaward Properties Having Opening Protection – Commercial Exhibit

Notional Scenario 2 – Seaward & Inland 1 Properties Having Opening Protection – Residential Exhibit

Notional Scenario 2 – Seaward & Inland 1 Properties Having Opening Protection – Commercial Exhibit

These results suggest that TWIA could improve its rate adequacy through programs that encourage policyholders to upgrade external openings to current building code standards.

TWIA’s recently submitted 2020 Biennial Report to the 87th Texas Legislature recommends that lawmakers consider the effectiveness of the Insurance Institute for Business & Home Safety’s FORTIFIED home construction program, whether TWIA should pursue such a program, and whether the State of Texas could provide funding support.

Other coastal states, notably Alabama and North Carolina, have encouraged FORTIFIED construction for both new and existing homes through a combination of public grants and policy endorsements covering upgrades to the FORTIFIED construction standards.

Source: TWIA

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