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Board Tables Proposal to Put TWIA Into Receivership

The board of the Texas Windstorm Insurance Association voted on Monday to table a proposal by Texas Insurance Commissioner Eleanor Kitzman that would essentially declare the agency bankrupt.

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The Texas Windstorm Insurance Association board on Monday tabled a controversial proposal by Texas Insurance Commissioner Eleanor Kitzman that would essentially declare TWIA bankrupt. Board members said they wanted to delay any vote until there were further settlement discussions with Hurricane Ike claimants. 

The board could take up the issue again at its May 21 meeting.

Kitzman has proposed putting TWIA into receivership. If that happens, the Texas Department of Insurance would step in, and Kitzman, as insurance commissioner, would gain the authority to run the organization. The powers of the TWIA board of directors, officers and managers would be suspended, except as delegated by the commissioner.

Coastal residents who attended Monday’s meeting said the Legislature should try to solve the organization's financial instability before the board approves such drastic action. 

“Within 60 days, you’ll know whether the Legislature can solve this problem or not,” said Joe McComb, a Nueces County commissioner. “That’s why they were elected to office. Let them solve that problem.”

TWIA’s current liabilities exceed its assets by $183 million. The insurer has spent more than $2.5 billion on claims related to Hurricane Ike, which devastated the Texas coast in 2008. In addition to the storm damages, TWIA has paid millions in litigation costs tied to its handling of Ike claims.

TWIA's legal counsel indicated in a letter to Kitzman on Friday that the organization would challenge any order to put TWIA into receivership and request a court hearing to halt the proceedings.

State lawmakers have also expressed concern that Kitzman’s proposal would have a detrimental impact on coastal policyholders who depend on TWIA as an insurer of last resort. Some coastal lawmakers have suggested that TWIA should assess money from private insurance companies to cover the organization’s lingering liabilities.

“The entire financial world will effectively be put on notice that TWIA can no longer be relied upon to pay claims or keep its other contractual commitments,” wrote Sen. Judith Zaffirini, D-Laredo, in response to written answers the TDI provided lawmakers on the proposal to put TWIA into receivership. She said such a move could hurt policyholders and the organization, and lead to lengthy delays to claims processing, the inability of TWIA to secure bonds to pay claims and, potentially, upset coastal residences’ mortgages and lead to foreclosures. 

Kitzman’s job is also on the line — as Zaffirini and other lawmakers concerned with her proposal to put TWIA into receivership have pointed out. She was initially appointed when the state was not in session; Gov. Rick Perry has not reappointed her to a new two-year term, and if the majority of the state Senate does not confirm her nomination, she will essentially be thrown out of office at the end of the legislative session.

Consumer advocacy groups have criticized Kitzman for her ties to the insurance industry, and point to her decision to roll back rules passed by her predecessor to protect policyholders from out-of-network health care expenses as evidence that she is biased toward protecting private insurance companies.

Kitzman could not be reached on Monday for comment, but in response to the allegations, she told the Tribune in September, “I have friends that work in the insurance industry, but that’s not how I make decisions.”

Also Monday, TWIA received an additional settlement offer from policyholders related to Hurricane Ike claims. Board members said the department should pursue settlement discussions before placing the organization into receivership. 

In 2011, lawmakers passed legislation to improve the financial stability of TWIA by reforming the claims process in 2011, and have filed more than a dozen bills this session related to TWIA. The Senate Business and Finance committee is scheduled to hear testimony on four bills on Tuesday.

While the Texas Department of Insurance has argued that TWIA is “insolvent” and that the department should put the organization into receivership, lawmakers have pointed out that Texas law allows TWIA to assess money from private insurance companies to cover liabilities.

The TWIA board of directors considered a proposal to assess $830 million from private insurance companies to cover Ike losses in 2008, but the proposal was rejected in a 5-4 vote, with the five insurance industry representatives on the board voting no, and the four coastal resident representatives voting yes.

At Monday’s meeting, TWIA board members did not address the option of assessing money from for-profit insurance companies to cover the organization’s liabilities. 

A handful of Democrat and Republican legislators in coastal districts sent a letter to Kitzman on Sunday arguing that the TWIA board of directors should reconsider assessing money from private insurance companies to cover TWIA’s lingering liabilities from Hurricane Ike.

“It is not too late for the Board to take action, assess the member companies, put $600 million in the Trust Fund and shore up TWIA’s funding situation which would eliminate the need to even discuss receivership,” states the letter, which was signed by Reps. Joe Deshotel, D-Beaumont; Craig Eiland, D-Galveston; Abel Herrero, D-Robstown; Todd Hunter, R-Corpus Christi; Eddie Lucio III, D-Harlingen; and Allan Ritter, R-Nederland.

"I am concerned that it appears that the Department of Insurance is the entity responsible for the receivership issue," Hunter wrote in a letter to Kitzman and the general manager of TWIA, John Polak. "I am also concerned now that TDI is the advocate for receivership not TWIA."

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