Gulf coast states have long struggled to deal with the increased risk of property damage in hurricane-prone coastal areas. In Texas, we have increasingly relied on TWIA (the Texas Windstorm Insurance Agency), a state-run entity which writes wind and hail policies in designated coastal counties.

TWIA is supposed to be an insurance provider of last resort, but its artificially low premiums have caused TWIA to grow far beyond this goal. And along with that expansion has come increased risk. TWIA’s total potential liability is around $77 billion, but it only has around $200 million cash on hand, with another couple hundred million in a catastrophe fund.

Now, after years of radical expansion, TWIA has begun to take steps to reduce its exposure and increase its ability to weather the next big storm. Most recently, the state-run agency has created a new online portal, which will make it easier for private insurers to write policies for current TWIA policyholders.

The site will contain basic information about current TWIA policyholders, like name, address, building characteristics, and the amount insured. Private carriers can then review the information and, if they wish, contact the agent of record to make an offer of coverage. Private carriers have to register and sign a non-disclosure agreement to gain access to the portal, and individual policyholders can opt-out of having their information provided.

Similar portals have been implemented in Florida and Louisiana, and have had some success in depopulating those states’ TWIA-equivalents. The current TWIA portal, however, is more modest than the Florida and Louisiana approaches in a way that will probably limit its overall impact. In Florida, for example, individuals are required to take a private policy if it is less than 15 percent more than the cost of their current policy.

In Texas, by contrast, acceptance of the new policy is completely voluntary. Given TWIA’s artificially low rates, it’s unlikely that many private carriers will be willing to match or beat TWIA’s rates. A TWIA report from last year recommended a more robust portal on the Florida or Louisiana models, but noted that this would require legislative action. Still, the new portal is a step in the right direction, and TWIA should be applauded for thinking creatively about how to improve its financial footing.


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