R Street disappointed by Hunter bill to reform TWIA
AUSTIN, Texas (January 15, 2015) – New legislation introduced by state Rep. Todd Hunter, R-Corpus Christi, would take the wrong approach to reforming the Texas Windstorm Insurance Association, the R Street Institute said today.
While Hunter’s bill correctly recognizes the need to shrink TWIA, calling for a 60 percent reduction in the pool’s total exposure over the next 12 years. But the measure fails to set forth a reasonable strategy to achieve that goal, which it proposes to enforce with the threat of $200 million in penalties assessed against member insurers.
“While reducing TWIA’s exposure is an important goal, this cannot be achieved by state mandates or by penalizing private insurers,” said Josiah Neeley, Texas director of the R Street Institute. “TWIA itself must be reformed.”
Instead of penalizing insurers, Neeley said the Legislature should enact reforms to adopt actuarially sound rates; lower the coverage limit extended to TWIA policyholders; end coverage for second homes; and strengthen TWIA’s depopulation portal to move more policies back into the private market. Additionally, TWIA should buy more reinsurance and issue more catastrophe bonds.
“The market is ripe for more risk transfer,” said Neeley. “Texas taxpayers should not be bearing this burden when there is ample interest from the private insurance market to take up the risk.”
