TWIA’s Request to Hike Liability Limits Denied; Rate Increase Decision Suspended
Texas’ property insurer of last resort for wind and hail along the Texas coast suffered a couple of setbacks in mid-October when the state’s insurance commissioner denied its request to raise maximum limits of liability and the governor put its rate increase filing on hold until next June.
The Texas Windstorm Insurance Association (TWIA) is required by law to annually file proposed inflation adjustments on the maximum liability limits for its windstorm and hail policies. The adjustments are supposed to track the BOECKH Index, which measures changes in construction costs.
It also is required every August to file rates for the coming year. The association this year requested a 10 percent hike in both commercial and residential rates, which under the state’s insurance code, were to be approved, disapproved or allowed to go into effect by Oct. 15, 2018.
TWIA additionally had requested an increase in the existing maximum liability limits for residential dwelling and individually owned townhouses and associated contents; contents of apartments, condominiums, or townhouses; commercial structures and associated contents; and governmental structures and associated contents.
In an order dated Oct. 11, Texas Insurance Commissioner Kent Sullivan declined to approve TWIA’s request raise its maximum limits of liability. In doing so, Sullivan said that since 1997, the cumulative adjustments to the maximum liability limits for TWIA policies have greatly exceeded the increases in the weighted average BOECKH Index.
TWIA had requested an increase of approximately 4.2 percent, from $1,773,000 to $1,847,000, for a dwelling, including an individually owned townhouse unit, and the movable property located in or about the dwelling, and as an extension of coverage, away from those premises, as provided under the policy. According to the commissioner, however, if TWIA’s historical increases had tracked the BOECKH Index, the maximum liability limit on those properties in 2019 would be $634,000.
TWIA also had requested an approximate 4.5 percent increase, from $374,000 to $391,000, for individually owned movable property located in an apartment unit, residential condominium unit or townhouse unit that is occupied by the owner of that property, and as an extension of coverage, away from those premises, as provided under the policy. If historical liability limit increases for these properties had tracked the BOECKH Index, the maximum liability limit in 2019 would be $229,000, TDI said.
TWIA additionally asked for an approximate 3.9 percent raise in the liability limit, from $4,424,000 to $4,495,000, for commercial buildings and the movable property located in those structures, and as an extension of coverage, away from those premises, as provided under the policy. The maximum liability limit in 2019 would be $2,779,000 for commercial buildings if increases since 1997 had tracked the BOECKH Index.
Suspended Rate Hike Decision
In a letter to Commissioner Sullivan dated Oct. 12, Texas Gov. Greg Abbott effectively extended until June 16, 2019, the deadline for approval or disapproval of the rate increase filed by TWIA in August.
The governor did so by suspending a section of the Insurance Code requiring that TWIA’s August rate filing, which requested a 10 percent hike in both commercial and residential rates, be approved or disapproved by Oct. 15.
In the letter, Abbott said a rate increase at this time would be unfair to Texas coastal residents who continue to recover from Hurricane Harvey, which devastated the Texas coast in late August 2017. The governor also indicated he wanted the legislature, which convenes after the first of the year, to have the opportunity to consider TWIA’s rate schedule.
“Strict compliance with this time frame would deprive the Legislature of the opportunity to address any actuarial deficiency in TWIA during the upcoming legislative session and could force a decision that hinders efforts to cope with the declared disaster,” Abbott said in the letter.
The rate hike has been opposed by state lawmakers representing areas hard hit by last year’s storm. It also was opposed by Texas’ Office of Public Insurance Council.
TWIA has indicated its rates are currently inadequate by 32.2 percent for residential policies and 37.3 percent for commercial policies.
In response to the governor’s letter, TWIA on its website commented: “We remain committed to serving our policyholders on the coast as we await any direction that may be provided by the Department of Insurance.”