April 9, 2019

House Committee on Insurance

Mr. Chairman and
members of the committee:

My name is Josiah
Neeley, and I am the Texas Director and an Energy and Environment Senior Fellow
at the R Street Institute. R Street is a nonprofit, nonpartisan public policy
research organization with a mission to engage in policy research and outreach
to promote free markets and limited, effective government. I am here today to
speak in opposition to HB 1772, 3632, 3633, 3960, 3961 and 3962.

The Texas
Windstorm Insurance Association (TWIA) was created to serve as an insurer of
last resort along the Texas coast. TWIA has faced persistent financial
difficulties, which are ultimately rooted in the fact that its rates are lower
than what is necessary to pay out claims over the long term.

As TWIA itself notes, in 2018 the agency’s rates were 32.2
percent below actuarially adequate levels for residential policies and 37.3
percent below actuarially adequate levels for commercial policies. TWIA has
been making progress toward rate adequacy with a series of rate increases
averaging 5 percent per year over the past decade.  

Reaching actuarially
adequate rates should be TWIA’s primary goal. Unfortunately, the legislation
being considered today would hamper TWIA’s ability to continue making progress
toward that goal. HB 1772, 3960, 3961 and 3962 would limit the ability of TWIA
to increase rates without the prior approval of the TDI Commissioner. HB 3632
would make rate increases above 5 percent subject to the veto of policyholders.
And HB 3633 increases the representation of groups traditionally hostile to
rate increases on the TWIA board. If enacted, these bills will make achieving
rate adequacy much more difficult.

unsustainably low rates are not simply a matter of abstract accounting. To the
extent that TWIA is unable to meet its obligations, Texans will be required to
pick up the bill. It is fundamentally unfair to require Texans who live
hundreds of miles from the coast to indirectly subsidize TWIA policyholders
through assessments on private insurance.

I would be happy to answer any questions.

Josiah Neeley

Texas Director

R Street Institute


[email protected]

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