Editor’s Note:

The insurance industry is expected to pay out a record $56.8 billion for 2005 insured residential and business property losses.

Is this the year Texas will be hit by the “big one?” Last year, Louisiana and Mississippi got hammered, Alabama and Florida, too, along with the year before. The big one, of course, is a hurricane-a Category 3, 4 or 5 storm that strikes a heavily populated coastal area causing unimaginable destruction.

It seems to be only a matter of time before Galveston, Houston or Corpus Christi sustain a major blow by a massive storm. We appear to be in a multi-year cycle in which hurricanes come fast, furious and strong. Dr. William Gray, the researcher at Colorado State University, has predicted another active hurricane season for 2006. According to Dr. Gray, there’s a 47 percent likelihood of a Category 3, 4 or 5 storm making landfall between the Florida panhandle and Brownsville this year. The historical average of such an event occurring is 30 percent.

The insurance industry is expected to pay out a record $56.8 billion for 2005 insured residential and business property losses, according to preliminary estimates by ISO’s Property Claim Services (PCS) unit. Damage from hurricanes represents the bulk of that figure, with five states accounting for more than 80 percent of claims: Louisiana, $27.2 billion; Mississippi, $12.2 billion; Florida, $9.9 billion; Texas, $2.9 billion; and Alabama, $1.5 billion.

Some in the insurance industry would like to see Texas better prepared for a storm of the magnitude of last year’s Hurricanes Katrina or Rita. Funding for the Texas Windstorm Insurance Association, the insurer of last resort for wind and hail insurance coverage for residents and business in the 14 counties along the Texas coast including a portion of Harris County, now stands at $1.3 billion. A group of insurers are urging the state to issue bonds to push the catastrophe fund up to at least the $3 billion mark. They would like the Texas Legislature to pass a bonding measure during the special session that is expected to be called this spring to once again address how the state funds its public schools (see story page 6).

Speaking at the Independent Insurance Agents of Texas’ Joe Vincent Management Seminar, Bo Gilbert, IIAT’s director for government affairs, said Gov. Rick Perry might be persuaded to bring the issue to the legislative table during the special session. But, Gilbert said, the industry has to show it is speaking in a unified voice on the issue, as the governor won’t want any divisiveness to distract legislators from their primary task of figuring out a legal and equitable way to finance schools and provide property tax relief.

Questions such as how the debt from the bonds will be serviced and how much money is actually needed remain to be resolved on this issue, so there’s still work to be done before the special session begins. It will be an interesting issue to watch.

Until next time, happy reading!