Funding for Texas Wind Pool a Top Issue for Insurance Industry

Funding, funding, funding. Those are three most important issues for the Texas Windstorm Insurance Association in advance of the 2009 legislative session, according to one industry lobbyist and advisor.

There are other issues of concern for TWIA, but the most critical is funding, says Jay Thompson, a partner in the law firm of Thompson, Coe, Cousins and Irons, and advisor to the Insurance Council of Texas.

Insurers currently are subject to “unlimited assessments” in the event a major hurricane wipes out the reserves of TWIA, the state’s insurer of last resort for coastal counties and part of Harris County. Insurers could then apply for premium tax relief to recoup that money — a scenario that could seriously deplete the state’s coffers.

“With the growth of TWIA, unless the funding issue and the unlimited assessments are addressed, both the state of Texas and the people in this industry could suffer severe losses,” said Thompson, speaking at the 2008 Mid-Year Property and Casualty Insurance Symposium, held by the ICT and the Association of Fire & Casualty Companies of Texas.

A compromise bill addressing funding for the association died on the last day of the session in 2007. Texas Sunset Advisory Commission staff in a recent review of the Texas Department of Insurance noted outstanding TWIA concerns, such as the make up of the board and territorial rating, but did not address funding, Thompson said. He suggested the issue would be considered in a stand alone bill but state Rep. Larry Taylor, R-Friendswood, said TWIA funding may be included in the TDI Sunset bill that by law must pass in 2009. If a consensus can be reached it could be included, Taylor said during a panel discussion at the symposium.

“But if it’s problematic … there will be stand alone bill,” said Taylor, an independent insurance agent. He agreed that for TWIA, “the core issues are funding. The make up of the board is not as controversial as some of the others, the territorial rating, those kinds of things — that’s going to be another bill,” he said.

Funding proposals are based on pre-event and post-event bonds. Lawmakers have been assured by TWIA that it could handle about $1 billion in pre-event bonds within its current rate structure, Taylor said. “The issue was the post-event bonds … how do you pay for those? … Obviously the coastal people will have to pay the biggest chunk.”

He said the remaining would likely be funded through “some kind of sharing among the rest of the state at a minimal level,” such as a $5 or $10 fee per policy statewide.