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Windstorm insurance will cost more throughout the state if the Texas Windstorm Insurance Association (TWIA) Board of Directors approve a rate filing increase as recommended by a July 11 vote of the agency’s Actuarial & Underwriting Committee. TWIA’s directors are set to meet on Aug. 8 to hear the committee’s proposal.
The recommendation, on a 3 to 1 vote, is for rates to increase by 5% for 2024 residential policies and by 8% for 2024 commercial policies. TWIA General Manager David Durden announced that committee member Stephen Alexander resigned preceding the vote.
TWIA Senior Legislative & External Affairs Specialist Aaron Taylor reported that the committee reviewed the 2023 Rate Adequacy Analysis prepared by TWIA actuarial staff that indicates TWIA rates are inadequate by 20% for residential coverage and 22% for commercial coverage. The “Rate Adequacy Analysis,” as detailed by TWIA, is an estimate of whether rates are sufficient to cover the association’s operating expenses and its expected losses from claims.
“The committee also heard public comment from stakeholders, including elected officials and other coastal community members,” Taylor advised, adding the next steps for approval – or denial. Aug. 8, in Austin, “The TWIA Board will consider the committee’s recommendation, the rate adequacy analysis, and stakeholder feedback when voting to decide the content of the association’s annual required rate filing with the Texas Department of Insurance (TDI).
“Two-thirds of the Board of Directors must vote to approve a filing for a rate increase, and any rate increase is subject to approval by the Texas Insurance Commissioner.”
In 2022, TWIA’s actuarial analysis found the association’s rates “to be inadequate by 15% for residential policies and 11% for commercial policies.” Still, against the recommendation of the actuarial committee, TWIA’s Board of Directors, at its August 2022 meeting, voted to direct staff to file a 0% rate change with TDI for residential and commercial policies issued or renewed on or after Jan. 1, 2023.
Even without the rate increase, TWIA statutory balance sheets reflect the financial position of TWIA, as of April 2023 compared to December 2022, with millions more than anticipated in the annual budget. Additionally, the statutory income statement provides a comparison between the actual and budgeted revenues and expenses for the four months ended April 30, 2023, and April 30, 2022, respectively.
Net income for the first four months of this year was $108.7 million –$16.0 million above the budgeted income of $92.7 million. TWIA attributed the higher-than-budgeted income to “better than planned loss experience, along with better than expected net earned premium and investment returns.”
“TWIA is the insurer of last resort, offering windstorm and hail insurance to home and commercial property owners who cannot get this coverage in the private market due to the risk of catastrophic hurricanes,” TWIA General Manager Durden detailed. “The availability of TWIA coverage allows people to live, work and do business in our coastal communities.
“Today, the coastal communities that TWIA serves are facing renewed economic challenges that recall the era of TWIA’s founding. An elevated level of inflation, especially in construction and related sectors, means that more insurance coverage – whether obtained from TWIA or a private-market insurer – is needed to protect the same property.”
TWIA was established by the Texas Legislature as the Texas Catastrophe Property Insurance Association in 1971 after a series of storms hit the Texas coast, prompting many private insurance companies to exit the market and leave property owners in the coastal counties of Texas without coverage. TWIA’s policy count reached an all-time high in 2014 with more than 275,000 policies.
Today, TWIA insures approximately 228,000 policies. Should they be needed, TWIA staff reports having modified response protocols to better serve clients: a new digital payment solution for emergency claim payments, better defined roles for TWIA personnel, better coordination and communication with emergency and disaster response, and updated pamphlets for policyholders. TWIA has activated its ever-modified “CAT Plan” 24 times since Jan. 1, 2012, for localized wind and hail events, according to agency data.
The statutory deadline for TWIA staff to make the annual rate filing with the Texas Department of Insurance is Aug. 15. The statutory deadline for approval or disapproval of a TWIA rate filing by the Commissioner of Insurance is Oct. 15.