Texas Windstorm Insurance Association, known commonly a TWIA, is the focus of yet another round of intense interest in preparation for today’s Actuarial and Underwriting Committee Meeting. In a recent release, the Insurance Council of Texas strongly urged that dialogue based on facts and analysis be at the core of rhetoric among all parties, elected officials, civic, government and business leaders. These leaders have a crucial role to play ensuring the solvency and financial stability of TWIA and all insurance carriers so that when Texans are devastated by losses, the promise made by an insurance policy is fulfilled.
Living in Texas means we are at high risk of severe weather. Hurricane, windstorms, tornadoes, hail, fires all impact our great state. Living on the coast means an increased risk of damage from wind due to hurricanes and tropical storms of all magnitudes impacting wide swaths of our coastline and miles inland. (See State of the Texas Property & Casualty Market)
TWIA INFORMATION VERSUS MISINFORMATION
TWIA, the insurer of last resort, is often a target of misinformation. For example, the zero rate increase made in August was a temporary decision conditional upon further review of the Actuarial Committee (those charged with analyzing TWIA’s current sustainability to pay future claims). Again, it was temporary not intended to close the door on further solvency discussions. Additionally, the Actuarial & Underwriting Committee is advisory and the only action that can result from Thursday’s meeting is a recommendation to the TWIA board.
According to TWIA’s own internal assessment, with a 0% increase, only 30% of TWIA premiums collected will go toward paying claims. The other 70% goes to administrative costs, repaying debt from catastrophe bonds, agent commissions, and other expenses.
TWIA, rates are often a competitive, sometimes even an affordable option available to residents. Examples of pricing taken from www.Helpinsure.com, a site developed by the Texas Department of Insurance, shows this reality:
*Helpinsure.com parameters include: zip code: 78410, $200,000 coverage, 1 loss, average credit
**TWIA covers damage from windstorm often excluded in private homeowners insurance coverage. TWIA is available in the 14 counties along the coastal bend that are most significantly impacted by wind/hurricane damage.
The private insurance market writes over $500 million in auto, residential, and commercial premiums along the Texas coast and is also committed to $1 billion each year for potential TWIA losses. That $1 billion is an assessment recovered from all Texans through their policy premiums.
Now, with the depletion of TWIA's Catastrophe Reserve Trust Fund (CRTF) after Hurricane Harvey in 2017, a heavy debt load from catastrophe bonds issued to pay claims, and a slow rebuild of the CRTF from policyholder premiums, TWIA faces important questions: How will it build its reserves before the next storm hits? What if a second storm hits in the same season?
TWIA has provided the public with various avenues to share their thoughts and will continue to welcome comments for today’s Actuarial and Underwriting Committee Meeting. It’s not likely that gas companies, building material suppliers, or farmers would welcome public comments when they are considering an increase in their prices, so we applaud TWIA for opening their lines. Conducting a thorough analysis of the issue and looking at statistics is critical to make sure all Texans are protected.
For additional information, ICT State of the Texas Property & Casualty Market (page 10) and ICT Protecting the Texas Coast discuss the challenges presented in TWIA’s current and future sustainability.