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TWIA: ABC Endorsement and Inflation Impacts on TWIA Policies Effective Sept. 15

The insurance industry at large is seeing significant increases in the cost of construction materials and labor. These increases, caused by rising inflation and supply-chain issues, may impact the amount of insurance policyholders need to sufficiently cover their property.

As you know, most insurance companies apply automatic annual adjustments to a policy’s limit of liability to account for rising building costs and protect policyholders from being underinsured. TWIA accomplishes this through an Adjusted Building Cost (ABC) endorsement (TWIA-220). The endorsement is automatically included with all TWIA residential policies.

TWIA revisits and updates the factors associated with the ABC endorsement on an annual basis, taking a two-year average from an independent industry-leading vendor. It helps ensure TWIA policy limits keep pace with local building and labor costs by increasing the Coverage A limits.

What Policyholders Can Expect
Policyholders will see automatic adjustments applied by TWIA’s ABC endorsement that are much greater than they have been in the recent past. Due to sharply rising inflation, the ABC factors for this year have increased to between 10.4% and 11.6%, depending on location. This applies to residential policies with an effective date on or after September 15, 2022.

Shown below are the changes to the automatic adjustments for this year compared with the past four years.

YearAutomatic Adjustment
2018No Change
2019No Change
2020No Change
20211.6 - 2.9%
202210.4 - 11.6%

Policyholders will see these automatic adjustments in their renewal packets sent 35 days prior to their policy effective date, or earlier if an agent submits the renewal transaction before then. Policyholders are not required to accept the automatic adjustment at renewal and can work with you, their agent, to determine the most appropriate amount of coverage.

As a reminder, even though policyholders are not required to accept the updated limits, some TWIA policyholders may need to increase coverage to maintain replacement cost coverage. To qualify for replacement cost coverage with TWIA, policy limits are required to meet a threshold of 80% insurance to value on the effective date of the policy.

Avoiding Underinsurance and Costly Mistakes
To avoid underinsurance and costly mistakes, there are several issues to address with policyholders:

  • This year’s automatic adjustments;
  • Any changes to the property that warrant updates to the replacement cost estimate or their coverage amount;
  • Review of insurance-to-value, including if they qualify for replacement cost coverage;
  • Other coverage decisions that may impact the policy premium, such as deductibles, optional coverages, and if the property should be classified as a primary or secondary residence.

To support that conversation, the information in this bulletin is also available on the TWIA website. Renewal offers are available for agents to review and edit in Policy Center 90-35 days prior to the renewal date.

Contact TWIA

If you have any questions or concerns about the ABC endorsement, TWIA's Policy Services team can help. Contact them by emailing [email protected] or calling (800) 788-8247.