A Texas Senate panel has moved legislation designed to reform and depopulate the Texas Windstorm Insurance Association. The bill immediately drew fire from insurance industry officials.
The bill, SB 1700, sponsored by Sen. Larry Taylor, emerged from the Senate Committee on Business and Commerce on May 7.
The bill would change the TWIAs name to the Texas Residual Insurance Plan and charge the states insurers with a $1 billion assessment, while forcing the insurance industry to purchase another $200 million in reinsurance.
The Property Casualty Insurers Association of America quickly voiced its opposition. We have serious problems with a number of the provisions, said Joe Woods, PCIs vice president, state government relations.
PCI is opposed to a $1 billion industry assessment fee and an additional $200 million mandatory purchase of reinsurance, Woods said. [The bill] does nothing to address rate inadequacy, Woods said, adding its various fees give TWIA or its successor no incentive to raise rates.
PCI also dislikes a proposed market reduction program designed to return TRIP to the status of being the states insurer of last resort for wind and hail damage. Woods told Bests News Service that the plan to reduce TRIP exposure by 20% on Jan. 1, 2016, 35% on Jan. 1, 2018, 45% on Jan. 1, 2020, 55% on Jan. 1, 2022 and 60% by Jan. 1, 2024 comes with a $200 million fine against the industry to be paid for by private companies that have not taken out their proportion of TRIP policies. The money paid to the TRIP board would be used on storm mitigation practices, Woods said.
TWIA is a nonprofit insurer of last resort providing wind and hail insurance for coastal area residents in the event of a catastrophic loss. It has faced difficult financial straits resulting from new claims and lawsuits dating back to Hurricane Ike in 2008. TWIA was given authority to access $2 billion in bonds and $500 million in assessments, but was told in 2012 that it could only place $500 million of the first $1 billion in bonds, leaving TWIA with a $2 billion capacity and $350 million in reserves and cash, well below the estimated $4.5 billion cost of a single 100-year storm. TWIA windstorm rates in its 14-county coastal region have increased 48% since 2005 and Texas Insurance Commissioner Eleanor Kitzman said last fall that TWIA reform would have to generate funding beyond the 14-county coastal region.
In late March, TWIAs Board of Directors considered entering into receivership to solve its financial problems, but tabled its decision until some effort was made by the state Department of Insurance to end outstanding claims and lawsuits.
The bill is the latest in a long line of legislative battles over what to do with TWIA.