Study Looks at Options to Depopulate Texas Coastal Wind Insurer

February 10, 2014 by

Loss exposure for Texas’ wind and hail insurer of last resort along the coast increased by around 319 percent between 2005 and 2012 – from $23.26 billion to $74.17 billion, and its policy count grew by approximately 243 percent – from 109,693 to 266,726.

The Texas Windstorm Insurance Association reported those figures in a feasibility study for a plan to create an online facility that would enable private insurers to voluntarily take homeowners policies out of the residual market.

The idea is that the voluntary coastal wind insurance portal would allow interested parties to register with the association in order to be able to access the underwriting information for TWIA insured properties and to determine whether or not they want to write the business, said Jim Murphy, TWIA’s chief actuary.

The portal “would provide physical characteristics, policy limits, etc., so that an interested company … could make the determination for themselves,” Murphy said during a December 2013 meeting of the TWIA board of directors. “It would allow them to contact the insured’s agent directly.”

A limited amount of additional effort would be required of the association, he said. The portal would “merely serve as a way for the two parties to come together.”

Murphy said the association would contact its insureds “to allow them the option to opt out. … We’re not going to publish anything if the insureds don’t want us to.”

TWIA General Manager John Pollack, also speaking at the December board meeting, said that the association’s staff has looked into the residual property insurance organizations in both Florida and Louisiana and the efforts those entities have made toward reducing their policy counts.

Because the association is a wind-only program it’s somewhat different from the Florida and Louisiana organizations, Pollack said. He also reminded the board that because the portal “is a voluntary program … our expectations need to be realistic that there’s a certain amount that we can do.”

Still, he said, “we think there’s a reasonable expectation of modest success with the carriers we’ve talked to.”

While agents welcome the idea of working with private insurance companies instead of TWIA on behalf of their insureds along the coast, some are skeptical that the voluntary program would be very effective.

Wally Goodman, a vice president/producer at Borden Insurance in Corpus Christi and a former TWIA board member, told the board that while agents are not against depopulation, they want to make sure that clients retain the ability to choose their agent.

“Frankly we would love to not have to do business with Texas Windstorm,” Goodman said. “It’s laborious, it’s time consuming, it’s expensive for us to do.”

Private insurance companies have long complained that it’s not profitable for them to write wind exposures along the Texas coast because they can’t compete with TWIA’s premium rates, which they say they say are not actuarially sound.

With that in mind, Goodman expressed some skepticism about the potential success of the program. “I think that if the insurance industry was going to voluntarily write policies on the seacoast they would have done so,” Goodman said.

Agents, though, “would love for the insurance industry to come back down and write all the business on the coast.” However, “the choice of agents within this process needs to be completely with the client,” he said.

Lee Loftis, director of government affairs for the Independent Insurance Agents of Texas, reiterated that viewpoint during the association’s Joe Vincent Management Seminar in Austin in late January.

Consumers must have the option to select their agent, Loftis said. IIAT recognizes that the growth in TWIA’s policy count is “not healthy.” But, he added, “we don’t see companies standing in line to write wind – good or bad risk.”

The Texas Windstorm Insurance Association Clearinghouse Feasibility Study may be found on TWIA’s website at