Texas Windstorm Insurance Rates to Rise Again in January

The board of Texas insurer of last resort for wind and hail along the Texas coast voted at its August meeting to raise premium rates beginning in January 2014.

The Texas Windstorm Insurance Association board of directors voted to file for a 5 percent rate increase to be effective Jan. 1, 2014, despite the protests of coastal residents and public officials who spoke during the public hearing portion of the Aug. 13 meeting.

TWIA is required to make a mandatory rate filing in August, although it is not required to file for either an increase or a decrease.

Over the past several years, the association has filed in August for a 5 percent rate increase to become effective the following January in an attempt to bring its rates up to a level that would be considered “actuarially sound.”

The board’s action went against the wishes of many of those who spoke to the panel. The collective message from those against the rate hikes was that the year-after-year rate increases are taking their toll on coastal residents and business interests, especially as they are coming now on top of significant increases in flood insurance.

“All we’re asking for is the consideration that all the moneys to fix what ails us does not come from the insureds,” said Elizabeth MacMillan, a Galveston-based insurance agent who is also a TWIA insured. “It’s a tough deal to explain to the clients when they say how much is it going to increase next year. And we say well we’re going to increase your coverage a little bit and increase your premium on top of that and some of these folks just simply can’t afford it. I appeal to you to look outside the box for solutions and not always go into the pockets of the insureds.”

No Assessments for Now

The TWIA board also voted not to assess its member insurance companies for losses from Hurricane Ike that have continued to grow since the storm hit the Bolivar Peninsula in 2008.

Uncertainty over whether the board has legal authority to pursue assessments on insurers for Ike losses at this time, rather than an unwillingness to do so seemed to be prevailing reason why the motion to assess did not garner enough votes to pass.

Four board members voted to assess, four voted against the motion to assess insurance companies $575 million for Ike losses, and one abstained.

Mike Perkins, general counsel for the Texas Windstorm Insurance Association, summed up the situation in advance of the vote, saying: “Although there is legal basis to support continuing authority to assess the members for losses incurred prior to the repeal of the law, such authority is not clear. [Former] Commissioner Mike Geeslin and [former] Commissioner Eleanor Kitzman expressed differing positions on the issue of whether the association should seek to assess the member insurers for additional Ike losses.”

Several board members expressed the opinion that it would be better to wait until Attorney General Greg Abbott responds to a request for an opinion as to whether the board has the capacity to act under the 2008 law.

Board Treasurer Alice Gannon, who abstained from the vote, said she would welcome the addition of $575 million to bolster TWIA’s financial position. However, Gannon said, “I feel strongly that there is a serious question as to whether the old law applies and to vote for an assessment now could put this board into the position of taking illegal action, which I can’t support.”

Although the board voted not to asses at this time, the proposal is not necessarily off the table.

The option to act on assessments would remain open, Perkins said, if relevant developments, such as a major storm or the attorney general’s opinion, make it seem prudent to do so.