Windstorm Insurance Debate Begins in Texas, Finally

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Texas legislators on April 7 finally jumped into debate over how to improve the troubled windstorm insurance system that serves as a last resort for hurricane protection along much of the Gulf Coast.

The House Insurance Committee, watched closely by coastal residents and insurance executives, began considering a slate of bills proposing changes to the system. It’s widely agreed the Texas Windstorm Insurance Asso-ciation (TWIA) needs an update, especially after the financial toll of 2008’s Hurricane Ike.

Gov. Rick Perry earlier this year declared reform of the windstorm association an emergency item this legislative session. Re-vamping TWIA has been on the minds of legislators for the past couple of legislative sessions, but they have been unable to reach a consensus on funding and other issues.

Rep. Todd Hunter, a Corpus Christi Republican, laid out proposals on assorted ways to potentially fund the windstorm insurance system. Among the ideas are general state revenue, federal economic stimulus money, the state’s Rainy Day Fund or assessments and fees on insurers or policyholders.

“To me, it’s a statewide issue,” he said.

Rep. Craig Eiland, a Galveston Democrat, put forth another windstorm association bill, as did Insurance Committee Chairman John Smithee, an Amarillo Republican. Smithee said he wants to ensure the solvency of the TWIA and make sure it operates on sound business principles.

The fund faces more problems than it did last session, when lawmakers failed to pass a reform bill. Smithee noted that this year several hundred million dollars the windstorm association had in its trust fund are gone because of hurricane claims; that bonding is not as easy because of the national economy; and reinsurance — a backup insurance policy for insurance companies — is now likely to be more expensive.

Insurers paying into the windstorm pool can recoup some of their assessments through state tax credits over several years, ultimately affecting the state budget.

Lee Otis Zapp of Galveston, with the Coastal Windstorm Insurance Coalition, told House members his group proposes to “keep it simple.” He outlined several ideas, including assessing insurance companies in a way that motivates more of them to return to voluntarily writing property policies along the coast.

“We’re from Texas, one Texas,” Zapp said. “We need help.”

At times, lawmakers sparred over how to spread risk around the state to pay for coastal damage. Smithee said currently TWIA policyholders with homes on the coast are not bearing the financial risk for claims that are paid for their damages, other than through their policy premiums, but residents in other parts of the state are. The Texas Coalition for Affordable Insurance Solutions, a group backed by some insurance companies, wants TWIA replenished in time for the 2009 storm season. It also wants creation of intermediate funding and long-term comprehensive reforms.

Some of the windstorm insurance bills are HB3640, HB3648, HB3853 and HB4733.