Slow death for coastal windstorm bill in last days of Texas session

In the waning days of the 2007 session of the Texas Legis-lature, marked by a tumultuous, unsuccessful struggle to oust the current Speaker of the House of Representatives, windstorm insurance legislation that was almost universally supported by insurance agents and carriers alike died a slow death. House Bill 2960, introduced in early April, was changed so much during the last week of the session that coastal legislators, originally some its staunchest supporters, could not vote for it.

HB 2960 was meant to address funding for the Texas Windstorm Insurance Association, the insurer of last resort for windstorm insurance in 14 counties along the Texas coast and a small portion of Harris County. Many believe TWIA is vastly underfunded should a major hurricane hit heavily populated areas of the coast, such as Galveston, Brazoria and Harris Counties.

The failure of the windstorm bill was “hugely disappointing to me,” said Rep. Larry Taylor, R-Friendswood. “I’ve been pushing it for two terms. Unfortunately it was pushed off until the end.” Taylor, speaking as part of a panel discussing legislative issues at the recent annual conference of the Independent Insurance Agents of Texas in San Antonio, said while as a coastal legislator the windstorm issue is of vital importance, he insisted that it is a statewide concern. “For those of you that don’t know, windstorm is a huge financial catastrophe that is waiting to happen in the state of Texas. This is not just a coastal issue,” Taylor said.

He indicated that if Gov. Rick Perry should call a special session for other legislation, such as transportation or the failed electric utility reform bill, there’s a good possibility the windstorm bill could have another chance this year. If no special session is called, it will be two years before the legislation can be taken up again.

James Langford, a member of the TWIA Board and a vice president at the Texas Farm Bureau insurance company, said the windstorm pool is seeing rapid growth. “The liabilities in force at the end of April were in excess of $45 billion. When it started this year, the liabilities were $38 billion, so it’s grown 18 percent through the first four months of this year. To make that even worse, 35 percent of that $45 billion is in Galveston County; 15 percent of that $45 billion in liabilities is in Brazoria County. Those two counties, which are next door to each other, account for 50 percent of all the liabilities in force in the wind pool.”

Langford said it has been estimated that a 100-year storm hitting those areas of the coast could cause losses of between $3 billion to $3.6 billion to the windstorm pool alone. Through its various current funding mechanisms — its own reserves, the statewide catastrophe reserve fund and reinsurance — TWIA would have around $1 billion to pay for losses. Insurance companies across Texas would be assessed at various stages to pay for the rest. Those assessments could result in a drastic hit on the state’s general revenue fund through premium tax credits to the assessed insurers, the panelists said. They would also endanger the smaller companies with fewer resources to pay them.

Among other things, the original legislation would have allowed for the issuance of pre-event and post-event bonds to boost TWIA’s funding.