Texas Windstorm Insurance Bill Passes
Texas lawmakers on the first day of the 2009 hurricane season and the last day of the Texas legislative session passed a bill – HB 4409 – aimed at recapitalizing the Texas Windstorm Insurance Association (TWIA). TWIA serves as the insurer of last resort to Texas property owners in 14 coastal counties. TWIA’s reserves were virtually wiped out by Hurricanes Dolly and Ike last year.
TWIA funding reform had been designated an “emergency item” by Gov. Rick Perry. The new plan provides funding for a $2.5 billion storm, beyond which a special session of the Texas legislature would be anticipated, according to the American Insurance Association (AIA). TWIA previously had an open-ended funding layer to pay for claims from multi-billion dollar storms, but the Texas legislature cited the rarity of such instances.
The new layers of TWIA funding include: 1) The first $1 billion in claims will be covered by post-event bonds, funded by TWIA policyholders; 2) The next $1 billion in claims would be covered by bonds to be paid on a 70-30 proportional basis between TWIA coastal policyholders and a non-recoupable assessment on statewide carriers not to exceed a maximum of $300 million; and 3) The final $500 million would be covered by statewide assessments on insurance carriers. Insurers have the option of financing, reinsuring or self-insuring their assessments.
Sen. Troy Fraser, R-Horseshoe Bay, told the Associated Press that one provision of the compromise plan calls for the state to provide a bridge loan of sorts to the windstorm fund until 10-year bonds can be issued after a major hurricane strikes.
The AIA and other insurance trade associations praised the legislature for finally passing a bill that addresses TWIA funding.
“Two important goals are accomplished from the insurance industry’s perspective in this legislation,” said Fred C. Bosse, AIA regional vice president. “First, unlimited assessments against insurance companies have been eliminated. Second, all such assessments are post-event. While the assessments won’t be recoupable, ending unlimited assessments and making them post-event only will go a long way toward maintaining a healthy insurance market in Texas.”