IIAT survey finds coastal insurance market tighter; more expensive

Property insurance along the Texas coast is getting harder to find plus premiums and deductibles are increasing, according to results from a survey of independent insurance agents. Respondents are members of the Independent Insurance Agents of Texas (IIAT). Current insurance market conditions are in comparison to an initial survey conducted in June 2006.

“Survey results indicate steps need to be taken to encourage insurance companies to write windstorm insurance voluntarily along the coast, while reasonably capping their exposures to losses from the mega-storms predicted for the future,” said Robert Hempkins, IIAT president.

Insurance companies have been withdrawing from writing voluntary business in Tier 1 counties (those closest to the water) for some years, according to David VanDelinder, IIAT executive director “Nearly all wind coverage in Tier 1 is written in TWIA, the windstorm pool, which officials estimate will grow to more than $40 billion in liabilities by the end of this year.”

The survey shows that companies have changed their appetite for business in Tier 2 counties as well. From June to October, nearly four times as many agents in Tier 2 report that companies have placed limitations on the amount of business they will write. Especially restricted is commercial insurance written in Harris County.

Hempkins explained that what happens to TWIA can affect property markets in the entire state. “As companies write more business in Texas, they become responsible for a greater share of the losses in TWIA. As TWIA grows, so does a company’s potential losses.”

As markets become more restrictive, insurance is costing coastal policyholders more. More than twice as many agencies in Tier 2 reported an increase in premium greater than 20 percent in October compared to June. At the same time, insurance companies are increasing mandatory deductibles for both homeowners and businesses. Homeowners policies are written with a 2 percent deductible in most agencies in Tier 2. Commercial deductibles of 5 percent or higher are increasing in many counties.

Hempkins commented, “If the coast is as important to our state economy as we think it is, then all policyholders in Texas have a stake in the insurance markets on the coast and should participate in some manner in the solutions. We urge the state legislature to address TWIA funding at the earliest possible moment.”

Survey at a glance

IIAT surveyed member agents in 19 Tier 1 or Tier 2 counties along the Texas Gulf Coast.

Of those responding, 31.68 percent said in personal lines in Tier 1 counties, many of the companies they work with are excluding wind coverage on renewals that they wrote last year; 28.71 percent said all of their companies were excluding personal lines coverage for wind. Of the respondents from Harris County alone, 38.24 percent said all of the companies with which they are affiliated are excluding windstorm coverage for personal lines and 20.59 percent said none of their companies had ever written windstorm coverage.

On the commercial lines side in Tier 1 counties, 30.69 percent of respondents indicated that many companies are now excluding on renewals windstorm coverage they wrote last year; 30.69 percent said all their companies are excluding wind for commercial property and 9.90 percent said none of their companies had ever written windstorm for commercial lines.

In Harris County, 35.29 percent or respondents said many companies are now excluding windstorm on commercial property renewals; 17.85 percent indicated all of their companies are excluding wind for commercial property; and 20.59 percent said their companies had never written windstorm coverage for commercial properties there.

While 46.85 percent of survey participants said they don’t write excess wind coverage in personal lines above TWIA building limits in Tier 1 counties, of those responding that would write it, 25.23 percent said such coverage is not available for some properties; 18.02 percent noted that coverage is available, but unaffordable.

As for excess wind limits for commercial properties in Tier 1 counties, 29.66 percent of respondents said they don’t write such coverage. Of those responding that do write it, 22.03 percent said excess wind coverage is not available for some properties; 14.41 percent said coverage is available but full building limits cannot be purchased; and 22.88 percent said such coverage is available but not affordable.

Compared with the beginning of the summer, 30.69 percent of agents participating in the survey said they were being forced to place most personal line business in Tier 1 counties in the surplus lines, or non-admitted markets; 29.70 percent responded that they were having to place some personal line properties in the non-standard markets. In Harris County around 59 percent of respondents said they had to place some or most personal lines properties in the non-admitted markets.

On the commercial lines side, some 67 percent of respondents reported having to place more commercial properties in non-standard markets, compared to the beginning of the summer.

In Harris County, just under 65 percent of respondents indicated that since June 1 they increasingly had to go to surplus lines markets to place commercial properties.

Complete survey results can be found online at http://www.iiat.org/pub/ issues/is_twia_ Pub.asp.