Texas Windstorm Insurer: $4.2B Available for 2019 Hurricane Season

Texas’ insurer of last resort for properties in counties along the state’s coastline says it has $4.2 billion in available funds as this year’s hurricane season gets underway. That amount includes a $111 million deposit into the organization’s Catastrophe Reserve Trust Fund (CRTF) based on financial results from 2018 and $2.1 billion in reinsurance.

By comparison, the Texas Windstorm Insurance Association (TWIA) had $4.9 billion available funds, including $737 million in its Catastrophe Reserve Trust Fund (CRTF), at the start of the hurricane season in 2017. In its annual report dated May 31, 2019, TWIA said that amount had proven sufficient to cover its “policyholders needs from Hurricane Harvey,” which struck the Texas coast in late August 2017.

TWIA reported that as of March 31, 2019, its incurred loss and loss adjustment expense from Harvey amounted to $1.61 billion and that it had paid out a total $1.25 billion payments to policyholders as a result of the storm.

TWIA noted that the number of complaints and claim disputes from Harvey has been low, especially compared with the association’s experience after Hurricane Ike in 2008.

“Claims complaint and dispute ratios from Hurricane Harvey remain extremely low at 0.38% and 5.4% of claims. In contrast, TWIA’s claim dispute ratio from Hurricane Ike was more than 11% with the disputes largely composed of lawsuits; lawsuits from Hurricane Harvey amount to less than 1% of claims,” the report states.

At the end of April 2019, TWIA had 197,391 policies in force, down from 219,818 at the end of April 2018. While TWIA insures both residential and commercial policies, residential coverages represent the bulk of the association’s exposure. Nearly 190,000 of TWIA policies currently in force are residential in nature and about 7,500 are commercial.

TWIA’s policy count peaked in 2014 when it had more than 275,000 policies in force. TWIA attributes the decreased policy count to greater interest by the private insurers in providing coverage along the coast. Since 2015, the association has conducted several rounds of depopulation efforts, whereby private insurers may make offers to take policies off the association’s books. The offers must be approved by agents and policyholders have the choice of whether to stay with TWIA or transfer to the offering carrier.

As a result of its depopulation efforts, TWIA saw a 7% decrease in direct written premiums in 2018, compared with 2017. The association recorded $410 million in direct premiums earned in 2018, down from $451.3 million earned in 2017.

Gov. Greg Abbott has signed a package of TWIA-related bills passed by the Texas Legislature in the session that ended May 27. The signed bills include SB 615, HB 1900, HB 1902 and HB 1944.

SB 615 responds to recommendations put forth in the Texas Sunset Advisory Commission staff review of TWIA last year. Among other things, SB 615:

• Authorizes TWIA to propose rules for adoption by the Texas Department of Insurance, and to request a hearing on the proposals.
• Eliminates the requirement for agents or policyholders to take action on depopulation offers during hurricane season and decreases the policyholder decision period on offers to 60 days or less.
• Calls for allowing auto renewals, premium installment payments and payment by credit cards.
• Requires new standards for TWIA board members, board member training, and processes to handle board member transparency and conflicts of interest.
• Requires TWIA’s rate adequacy analysis to be available on its website for at least 14 days before the board votes on a proposed rate filing.

Provisions of HB 1900 include:

• Transfers the WPI-8-C compliance process to TDI and strengthens oversight of the process.
• Adds a requirement to call an emergency board meeting to notify member companies if storm loss assessments are needed.
• Creates a legislative oversight board to analyze TWIA’s current funding and funding structure and recommend changes.
• Authorizes legislative oversight board to study a possible merger of TWIA and Texas FAIR Plan Association.

HB 1902 provides that a TWIA maximum liability limit filing is considered approved unless the filing is modified or disapproved by the insurance commissioner within 30 days of receipt.

HB 1944 allows the insurance commissioner to extend TWIA claims filing deadlines.