Debate on the Texas Windstorm Insurance Association dominated Tuesday's Texas Senate Committee on Business and Commerce hearing as lawmakers raised concerns over rate increases proposed by the Texas Department of Insurance.
TWIA financing “is a serious issue,” said committee chairman John Carona, R-Dallas, and one that “not enough people in the capital are taking seriously.”
As the state-run insurer for coastal residents without other property insurance options, TWIA has been struggling to get its finances in order since Hurricane Ike hit Texas in 2008. The association paid billions in claims to homeowners for hurricane damage and then millions more on lawsuits related to mishandled claims.
Texas lawmakers restructured the financial structure of TWIA last legislative session and gave the association the power to vary insurance rates territorially depending on weather risk factors. TWIA’s board of directors delayed a decision to vote on territorial rate changes in May, but it still came under fire for approving a 5 percent increase in premium rates for all TWIA policyholders.
Eleanor Kitzman, commissioner of the Texas Department of Insurance, testified Tuesday that all decisions the agency makes relate to TWIA in some way and the state must look for broader solutions to sufficiently fund TWIA.
“The solution is not just raising rates on the coast,” she said. “Rates need to be higher than they are.”
TDI recently postponed meetings planned in Austin and Corpus Christi to discuss a proposed rule that would add a surcharge to property insurance policies, including TWIA policies, in coastal counties. Kitzman said that meeting was postponed due to confusion about its "nature and purpose.”
Sen. Eddie Lucio, Jr., D-Brownsville, said he was “highly disappointed” by TDI’s decision to postpone the meetings. And Sen. Leticia Van de Putte, D-San Antonio, suggested that the decision may have been counterproductive.
“It just added to the confusion when you postponed,” Van de Putte said.
The committee also heard testimony on general homeowner insurance rates, as Kitzman and the legislators discussed the spiraling costs of homeowners’ insurance since 2003. Since that time, the cost of reinsurance (insurance purchased by an insurance company as a means of risk management) has doubled and the state devotes 68 percent more money to underwriting, said Kitzman, adding that these were the consequences of industry changes and natural disasters since 2003.
But Kitzman said there is no “silver bullet” to improve insurance benefits while also adhering to modernized building safety codes. “I don’t have anything I can recommend today that’s going to have an immediate impact,” she said.