Higher Limits of Liability for 2020 Disapproved for Texas Windstorm Insurer

In mid-October, Texas Insurance Commissioner Kent Sullivan denied a request by the Texas Windstorm Insurance Association (TWIA) to raise its maximum liability limits for new and renewal policies with an effective date of Jan. 1, 2020, or later.

TWIA is the property insurer of last resort for wind and hail in counties along the Texas Gulf Coast.

In August, TWIA submitted to the Texas Department of Insurance its proposal to adjust the maximum liability limits on properties it insures. The association’s board of directors is required by statute to propose adjustments to maximum liability limits annually. The limits of liability apply to the maximum amount of coverage a policyholder can purchase from TWIA. The adjustments are supposed to track the BOECKH Index, which measures changes in construction costs.

A public hearing on the proposed adjustments was held on Oct. 7. TWIA testified in support of the proposal. TDI staff testified they were not aware of any availability issues in the private market for coverage in excess of TWIAs maximum liability limits.

TWIA’s filing showed that residential dwelling risks, 121 contents risks, and 118 commercial risks are at the current maximum limit, according to TDI.

TDI reported that the adjustments to the maximum limits of liability requested by TWIA are as follows:

• An increase of 2 percent, from $1,773,000 to $1,809,000, for residential dwellings and individually owned townhouses and their contents. Had the historical increases tracked the BOECKH Index since 1997, the maximum liability limit in 2019 would be $647,000.
• An increase of 1.9 percent, from $374,000 to $381,000, for the contents of apartments, condominiums, or townhouses. Had the historical increases tracked the BOECKH Index since 1997, the maximum liability limit in 2019 would be $233,000.
• An increase of 2.1 percent, from $4,424,000 to $4,519,000, for commercial and governmental structures and their contents. Had the historical increases tracked the BOECKH Index since 1997, the maximum liability limit in 2018 would be $2,838,000. Under Insurance Code Section 2210.502(d), the maximum liability limit applicable for governmental buildings is indexed the same as the maximum liability limit for commercial buildings.

The cumulative adjustments to the maximum liability limits of TWIAs policies since 1997 have significantly exceeded the increases in the weighted average BOECKH Index factors that measure changes in construction costs, according to TDI.

The association also filed a proposal to raise limits of liability for both residential and commercial properties last year. However, in October 2018, Commissioner Sullivan declined TWIA’s request.

The current commissioner’s order disapproving TWIA’s requested adjustment to its limits of liability is number 2019 – 6110.

Topics Catastrophe Natural Disasters Carriers Texas Windstorm