Texas Coastal Lawmakers Urge Denial of Windstorm Insurer’s Filed 10% Rate Hike

More than 20 state legislators have signed a letter addressed to Texas Insurance Commissioner Kent Sullivan requesting that a 10 percent rate increase filed by the state’s property insurer of last resort for wind and hail along the Texas coast not be approved.

The Texas Windstorm Insurance Association in August filed with the Texas Department of Insurance a 10 percent rate increase for residential and commercial properties that would go into effect next year.

In an announcement on its website, the association said that at its late July quarterly meeting TWIA’s board approved a rate increase for 2019 upon the recommendation of the Actuarial and Underwriting Committee. TWIA said its rates are currently inadequate by 32.2 percent for residential policies and 37.3 percent for commercial policies.

The association noted that currently, the average premium on a TWIA residential policy is around $1,600; a 10 percent rate hike would raise the premium for that average residential policy by $160.

The proposed rate increase must be approved by the insurance commissioner. If approved, it will go into effect Jan. 1, 2019. New business and renewal policies issued in 2018 will not be affected by the rate increase until the policies renew in 2019.

In the letter to Commissioner Sullivan, members of Texas’ coastal legislative delegation said the 10 percent rate increase would be “unfair, excessive and unreasonable” for coastal residents who continue to struggle to recover from Hurricane Harvey, which struck in late August 2017.

“The restoration of businesses and homes is ongoing, and local tax bases face uncertainty as their values depend on residents’ capacity to adjust to higher costs associated with building, and now insuring, those structures. The lingering economic effects of Harvey have negatively impacted many TWIA policyholders and any rate increase at this pivotal point would be unfair and unreasonable,” the letter states.

The coastal legislators noted that TWIA has “an unprecedented $4.9 billion available to pay Hurricane Harvey losses.” That amount is far greater than TWIA’s total loss estimate from Hurricane Harvey of $1.6 billion, the letter points out. According to the delegation, until the association’s “current level of funding proven to be inadequate to pay projected losses,” a rate increase should be denied.

Then Insurance Commissioner Mike Geeslin set a precedent for disallowing a rate increase following a catastrophic event when he denied TWIA’s filing for a 10 percent rate increase in October 2009, just over a year after Hurricanes Ike and Dolly made landfall on the Texas coast, the lawmakers said. In denying the rate hike, Geeslin recognized that a rate increase following devastating events such as the 2008 hurricanes would hamper the ability of coastal residents to rebuild their homes and businesses.

In their letter, the legislative group cited a number of issues that they believe support their request for the denial of the rate increase. Among them is the composition of TWIA’s Actuary and Underwriting subcommittee, which reviews and recommends “a rate to the full TWIA board for purposes of the Association’s annually required rate filing for residential and commercial policies.” The majority are insurance industry employees and “their employers hold a financial interest in TWIA’s annual rate filing process,” the letter states. Because of that lack of diversity, the subcommittee’s rate recommendation “circumvents the will of the state legislature and violates the spirit” of changes to state law made in 2015.

During the 2015 session, lawmakers sought to ensure that three major TWIA stakeholder groups: “first tier coastal counties, non-coastal representatives and industry representatives actively writing and renewing wind and hail insurance along the coast,” are equally and fairly represented, the group asserted. With only insurance industry members on the actuary and underwriting subcommittee, other stakeholders are left out of the rate decision-making process. Therefore, the composition of the committee should be changed to include members of all stakeholder groups, the coastal delegation said.

Lawmakers who signed the letter to Commissioner Sullivan are: Sen. Larry Taylor, District 11; Sen. Paul Bettencourt, District 7; Sen. Brandon Creighton, District 4; Sen. Sylvia Garcia, District 6; Sen. Juan “Chuy” Hinojosa, District 20; Sen. Joan Huffman, Texas Senate District 17; Sen. Lois Kolkhorst, District 18; Sen. Eddie Lucio Jr., District 27; Sen. Judith Zaffirini, District 21; Rep. Dennis Bonnen, District 25; Rep. Greg Bonnen, District 24; Rep. Joe Deshotel; District 22; Rep. Wayne Faircloth, District 23; Rep. Ryan Guillen, District 31; Abel Herrero; District 34; Rep. Todd Hunter, District 32; Rep. Oscar Longoria, District 35; Rep. J.M. Lozano, District 43; Rep. Eddie Lucio III, District 38; Rep. Geanie Morrison, District 30; Rep. Rene Oliveira, District 37; Rep. Dade Phelan, District 21; and Rep. Ed Thompson, District 29.

After TWIA filed its proposed rates, Commissioner Sullivan requested feedback and comments were accepted through Oct. 1. Per state statute, Commissioner Sullivan has until Oct. 15 to decide on the rate filing.

According to TWIA, its rates increased by 5 percent each year from 2011 through 2016. Rates remained the same in 2015 and again increased by 5 percent in 2018. The insurer says it calculates premiums on “standard rating factors, including amount of insurance, type of construction, deductible amount, and any optional additional coverages.” Credit scoring and territorial rating do not factor into its rating methodology. Properties certified as built to recent windstorm building codes may be eligible for premium credits.