Texas seacoast panel finds TWIA solutions hard to find
During the first hearing of Texas’ Joint Seacoast Territory Insurance Committee earlier this week, three different insurance-related agencies unequivocally told lawmakers the Texas Windstorm Insurance Association was not actuarially sound.
While this was not news to anyone in the room, it was noteworthy to see the utter frustration of officials in determining how best to solve the ongoing problem.
Insurance Commissioner Kitzman suggested TWIA should use the basic insurance principle of territorial rating to charge policyholders based on their assumed risk. In other words, if homes are situated farther from the coast, their premiums would be lower than waterfront property. While agreeing to the necessity of depopulating TWIA, the commissioner relayed that she did not have the tools to encourage alternate carriers into the market since she lacked the funding for economic incentives for such private market entry.
Insurance Public Counsel Deeia Beck offered retrofitting homes and requiring strict building codes as the best way to make properties attractive to private insurers. According to her office, the average home would require $2,400 in upgrades to meet the International Residential Code. However, the claims from buildings meeting code were $7,000 less on average than those that did not meet the stricter construction requirements.
While the state does not provide direct assistance to citizens, the federal government does provide funding for retrofitting homes and businesses in the form of Community Development Block Grants and the Weatherization Assistance Program. Though these programs were designed primarily for energy efficiency, the upgrades in doors, windows and roofs serve a dual purpose in protecting structures from wind damage while conserving energy throughout the year.
Whatever lawmakers ultimately decide, it must incorporate a plan to spread the risk outside of Texas. Concentrating the risk — through, for example, a statewide catastrophe fund — would only multiply TWIA’s problems on a larger scale rather than dealing with the problems at hand.
