The Texas Department of Insurance met Wednesday to consider whether to expand liability for the Texas Windstorm Insurance Association (TWIA). State law caps the amount that TWIA can cover in an individual policy, but allows it to request increases in the cap each year to account for increased construction costs.

This year, TWIA is asking to increase the maximum allowable coverage amount from $1.77 million to $1.85 million for individual townhouses; from $370,000 to $390,000 for the contents of apartments, condos or townhouses; and from $4.4 million to $4.6 million for commercial structures and their contents.

It was a brief and somewhat sleepy affair. There was testimony from TWIA’s actuary, as well as from a coastal area interest group. The hearing was adjourned with a decision left pending.

On the surface, the whole thing might seem routine. And yet, for the past two years, TDI has denied TWIA’s request for increase, and there is a decent chance it will do so again this year. As TDI noted in its previous denials, TWIA’s liability increases over the last decade have far exceeded the cost increases in the BOECKH Index (upon which TWIA is statutorily supposed to base its increase requests).

For example, from 2005 to 2013, the BOECKH Index factors relating to individually owned townhouses have increased by about 30 percent. By contrast, TWIA’s maximum allowed liability for individually owned townhouses has increased by 305 percent over the same time period (no, that’s not a typo). If prior liability expansions have been excessive, it only makes sense to hold off on further expansions until the long-term trends aren’t quite so out of whack.

From a big picture perspective, there is something more than a little odd about approving any liability expansion, given TWIA’s overall precarious financial position. TWIA currently has $77 billion in liability. Were Texas to be hit by a major storm, it likely would not be able to meet its financial obligations. Indeed, in 2013 TWIA briefly considered going into receivership to deal with claims made after 2008′s Hurricane Ike.

It’s true that, compared to TWIA’s current liabilities, the proposed increase in exposure from its current request would be minimal. But to paraphrase Everett Dirksen, even if TWIA only expands its liability by a little each year, pretty soon it will add up to real money. When TWIA’s financial viability is in doubt, insuring houses worth more than $1.8 million should not be high on the organization’s priority list. Texas needs to be looking at ways to lower TWIA’s liability exposure, not expand it.

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