TWIA Rates to Rise

Commercial and residential rates for policies written through the Texas Windstorm Insurance Association (TWIA) will rise in February when rate increases approved by the Texas Department of Insurance (TDI) go into effect.

Texas Insurance Commissioner Mike Geeslin approved rate increases of 12.3 percent for residential and 15.6 percent for commercial policies, effective Feb.1, 2009. State law caps rate changes for TWIA at 10 percent, but TDI has the authority to suspend the cap after catastrophic losses.

“These rate increases are a continuation of our long term goal to build up the financial strength of TWIA,” commented Commission-er Geeslin. “While some may argue that they need to be higher, we need to be mindful that our coast-al region is in recovery. Coastal re-sidents are overburdened as it is.”

Insurer trade groups praised TDI’s actions.

“We agree with Commissioner Geeslin that his decision… to raise both TWIA commercial and residential rates is the first step needed to fund the depleted Catastrophe Reserve Trust Fund,” said Mark Hanna, spokesman for the Insurance Council of Texas. “We hope that members of the Texas Legislature will address this problem in a manner that will provide financial stability for the wind pool and its policyholders.”

“There is a broad agreement that TWIA must have sufficient funds to pay all legitimate claims in the event of another Hurricane Ike, or worse. TWIA is not a bottomless financial well,” said Jerry Johns, a spokesman for TWIA and president of Southwestern Insurance Information Service. “Increasing rates for TWIA policyholders is one of many ways to be certain that TWIA will be in a stronger financial position when people living along the Texas coast suffer wind damage to their property.”

Geeslin said costs to TWIA from Ike were around $2.7 billion at the end of November but that the full cost of claims won’t be known until mid-December. In-surers were assessed $530 million this year to pay claims from hurricanes Dolly and Ike, $230 million of which is subject to tax credits.

Geeslin noted that TDI will continue to work with the Legislature on ways to improve funding for TWIA that will lessen the reliance on state revenues and Texas taxpayers. He told Insurance Journal it is unlikely that further rate increases would be considered until after the full cost of Hurricane Ike is assessed and legislative action, if any, is determined. TWIA would have to submit another rate filing to TDI for further increases to be considered, Geeslin said.

TWIA policyholders will see the increase at policy renewal, beginning Feb. 1.

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